GLOBAL MANUFACTURING OUTLOOK

By Royce Lowe

The Global manufacturing scene of late has been the victim of falling demand in most of the major economies. This led to caution on the part of manufacturers, with purchasing cut back sharply, inventory destocking, employment broadly flat, and business optimism dipping to a seven-month low. France and Germany are forecasting production to fall over the next 12 months. In the PMI rating, India is still out front, but powerhouse Germany, and Austria, are claiming the last two places.

The global PMI for June was at 48.8, down from May’s 49.6. There is no encouraging news at the moment to suggest an upturn in the situation. That said, both Japan and China showed a manufacturing PMI just above the 50 mark. There is still good demand for Indian-made products both domestically and internationally. India’s PMI for June fell marginally to 57.8 from May’s 58.7. The PMIs for the U.S. and Canada were both below the 50 mark, with further drops in June.

The ASIS intelligence report (https:// asisintelligence.com/) is looking to an approximately 7% drop in the U.S. manufacturing sector over the next months, including primary and fabricated metals, through 2024. This is not a drop of the same magnitude as the COVID drop, nor the 2008 recession drop, but in the short to medium term is considered to be significant. Economist Intelligence is looking for global growth in 2023 of 2.1%, which represents a slowdown. The oil price is expected to remain above $75 USD per barrel until 2025. Global inflation will ease in 2023 but will remain high at around 7%. The U.S. Bureau of Economic Analysis’s third estimate for the first quarter GDP was 2.0%. Global steel users are seeing production increase at the fastest rate for several months but a slowing in new order growth. This increase is concentrated in the U.S. and Asia; Europe is showing the sharpest deterioration for three years.

Asia is the only copper user showing an increase in new orders and production at mid-year. Europe and the U.S. are showing a lack of demand. Aluminum’s recent production growth was the highest since February, but new orders are rising at a weaker pace. The upturn was led by the strongest expansion among Asiabased firms for four months, while there was also a renewed rise in the US. The rate of contraction among European users was the steepest since May 2020.

Times are certainly not of the best for most of the world’s major manufacturing nations. The U.S. and Europe are suffering from a lack of demand and, in fact, a tendency for a reduction in employment. Despite all this, a European consensus tells us there is no cause for panic. Non-ferrous metal prices are settling down - the emphasis on the word down. Recent prices, compared with those six months ago, are: Aluminum $1.00 per lb ($1.28); Copper $3.90 per lb ($4.20); Nickel

The Outlook: No telling when Europe’s fortunes will return to favor, and China’s readings are expected to weaken. China’s population decreased in 2022 due to its previous one-child policy which may cause a worker shortage for two decades. Japan is still working through several decades of decline caused in large part by an aging population and zero population growth. Japan has reached a historical turning point. In eight years, it is estimated that the number of women of childbearing age will fall to a point where population decline cannot be reversed. The U.S. is also approaching zero population growth.

Historically, nations that have approached zero population growth or a population decline have experienced a parallel, protracted period of economic decline until birth rates reverse and feed the country with bright, young minds. However, it may take several generations for such a reversal to be achieved. Japan may become an unfortunate case study.

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