MANUFACTURING IN U.S. TAKES A LEAP IN MARCH. EUROPE IMPROVES, BUT ALMOST ALL DUE TO SERVICES

By: Royce Lowe

The U.S. inflation rate is 6.0% for the 12 months ended February 2023. Data from Armada Strategic Intelligence System (ASIS) suggests that manufacturing industrial production will tend to stabilize in Q2, then improve through the year end. As for the primary metal sector, there will be a good improvement in Q2 and Q3, before a downturn in Q4. The fabricated metals sector will “blip” in Q3, before receding in Q4 and through the first half of 2024, when some recovery will be seen in the back end of the year.

People in the manufacture and distribution of goods moved into heavy inventory building in 2022, and 70% of those companies find themselves overstocked. At the same time, global inventories of non-ferrous metals are at multi-decade lows. The aerospace and miscellaneous transportation sector looks healthy through the rest of 2023. Computer and electronic products will pick up steam starting Q3 of this year. The machinery sector will suffer a lack of demand through mid-2024. Motor vehicles and parts will see good demand through 2023, with a downward trend for early 2024, and a correction in Q2 of that year.

In the U.S., the “flash” composite index for March is at 53.3 versus 50.2 in February; flash services at 53.8 versus 50.6; the manufacturing production index was at 51.0 versus 47.4 and the manufacturing PMI reading was at 49.3 versus 47.3.

Demand was up and new order growth returned. U.S. companies saw a renewed expansion in business activity in March. Production grew at a solid pace that was the fastest since May 2022, as demand conditions improved and new order growth returned. Both manufacturers and service providers registered upturns in output, with service sector firms driving the increase.

Total U.S. new vehicle sales for March 2023, including retail and non-retail transactions, are projected to reach 1,330,700 units, a 6.2% increase from March 2022, according to a joint forecast from J.D. Power and LMC Automotive. March 2023 has the same number of selling days as March 2022. New-vehicle total sales for Q1 2023 are projected to reach 3,526,700 units, a 7.3% increase from Q1 2022 when adjusted for selling days.

The UK slipped again, with the composite index back at 52.2 versus 53.1 in February; services at 52.8 versus 53.5, manufacturing production at 49.0 versus 50.9 and manufacturing at 48.0 versus 49.3.

Japan’s services PMI is still on the rise, with a flash composite index of 51.9 versus February’s 51.1; services at 54.2 versus 54.0, and manufacturing production at 47.4 versus 45.3.

According to the China Association of Automobile Manufacturers, auto sales in China surged by 13.5% from a year earlier, to nearly 1.98 million units in February 2023, rebounding sharply from a 35% plunge in the previous month. Data from the China Association of Automobile Manufacturers (CAAM) showed it was the first increase in car sales in four months. Meanwhile, sales of NEVs jumped 55.9 percent year-on-year to 525,000 units in February. For the first two months of the year, car sales fell by 15.2 percent from a year earlier to 3.625 million units, reversing from a 7.5 percent growth in the same period of 2022.

Global inventories of non-ferrous metals are reported at multi-decade lows. The prices of non-ferrous metals through most of March were on the decline, but not to the same extent as during February. Aluminum went from $1.18 to $1.15 per lb during March, but 60 days ago was at $1.70; copper from $4.11 to $4.08, 60 days ago at 4.20; nickel from $11.70 to $10.10, 60 days ago at $12.8 and zinc from $1.40. to $1.32, 60 days ago at $1.32. LME stocks are trending up a little.

The global manufacturing situation is on a slow improvement path. Demand is not the best, but there are several bright patches, such as aerospace, motor vehicles, and computer and electronic products. Car sales are up. The words inflation and recession are still on front pages, and naturally impact manufacturing industries. The latest results from U.S. manufacturers are encouraging. With spring and lower energy consumption, the world is a little more optimistic.

Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook. n