MANUFACTURING OUTLOOK

By Royce Lowe

Soft But Stable

The S&P Global scenario for April shows production up slightly and supply chain pressures easing to the greatest extent in 14 years. The PMI for April was unchanged from March at 49.6 and below the 50 mark for the eighth consecutive month. There was a solid expansion in consumer goods and a marginal increase in investment goods. The downturn in intermediate goods extended into its tenth month. Production growth accelerated to an eleven-month high in the U.S., and the PMI went into expansion in April at 50.2, up from 49.2 in March. China slipped slightly from 50.0 in March to 49.5 in April, and there were falls in Japan and the Eurozone.

Canada showed improvement from 48.6 to 50.2 in April. India, again, showed a good gain from 56.4 in March to 57.2 in April.

Data from ASIS suggests that manufacturing industrial production will show a very slight overall contraction through 2023, whose second half will show a recovery after a very similar contraction in the first half of the year. A slight downturn is forecast in Primary Metals and Fabricated Metals from Q3 of 2023 through the end of Q2 in 2024. A healthy scenario is forecast for Aerospace and Miscellaneous Transportation Equipment through 2023 and most of 2024. Motor Vehicles and Parts look good through 2023, with a dip in Q2 of 2024. The automotive sector is still looking healthier in the U.S., China, and Western Europe. Tesla’s recent price cuts may pose some (cost-profit) difficulties for other manufacturers. Diminishing consumer credit may also be a problem. Machinery looks fairly healthy through 2023, with a dip in 2024.

Inventories of the major non-ferrous metals are low. As of mid-May, prices of aluminum, zinc, and nickel are showing a significant downward trend, with nickel falling from $11.20 per lb to $9.60 per lb in the month to mid-May. Copper is holding up better. LME stocks are generally low. Global steel users report a marginal improvement in operating conditions in April, with renewed rises in production, new orders, and employment. There were returns to growth in the U.S. and Asia, whereas in Europe, the rate of decline quickened to the fastest for four months.

Global aluminum-using firms registered rising new orders in April for the second time in the year to date.

Both the U.S. and Asia recorded a renewed increase, while firms in Europe saw a 14th consecutive reduction in demand.

Global copper-using firms registered rising new orders for the third month running in April, with the rate of expansion strengthening to a moderate pace from that seen in March. There was a rise in incoming business in the U.S. for the first time since May 2022, while firms in Asia saw a solid increase. By contrast, European copper users saw a steeper rate of decline.

J.P. Morgan’s global economist, Bennett Parrish, comments: “The April PMI surveys point to the continuation of a gradual growth path for global manufacturing production following a step out of contraction territory at the start of the year. Underlying details of the survey suggest that growth is being held back by softening investment spending and a continued drag from inventories. This dynamic is consistent with the relative weakness in North Asia, where tech sector weakness persists.”

Manufacturing output edged higher for the third successive month at the start of the second quarter, with the expansion in consumer goods being the main reason. Business optimism among manufacturers is at a 14-month high, with manufacturers, on average, looking for production growth over the coming year. The situation in Europe is less optimistic than those in the U.S. and Asia. The outlook for the U.S. in coming months may be termed optimistic, but there again somewhat “wait and see.”

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