Cautious Optimism For a New Era of Global Growth

Transcription

1 Cautious Optimism For a New Era of Global Growth delivered at the meeting of Steel Founders' Society of America September 12, 2017 Kris Bledowski Senior Economist and Council Director kbledowski@mapi.net

2 Today s Presentation A global overview U.S. outlook A detailed look at American Manufacturing An overview of European industry and SFSA end-markets What s important in China

3 The Outlook From 30,000 Feet Clear signs of coordinated but modest global growth improvement. The falling dollar a tailwind for U.S. manufacturing at a time of global economic strengthening. A moderate upgrade in U.S. manufacturing growth over the nearly stagnant period. Political/Policy shocks, Brexit uncertainty, and the confrontation with North Korea the principle risks to U.S. manufacturing outlook.

4 Central Bankers Breathe Easier: Deflation Risks Abate Consumer Price Inflation: Japan, the Eurozone, and the UK 6 5 Percent (Year/Year) Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Japan Eurozone United Kingdom Source(s): IHS Global Insight, and United Kingdom Central Statistics Organization (year/year for China and the Eurozone, annual percent rate for the UK)

5 Expectations Grow For An Improved Global Outlook World GDP Growth Percent (F) 2018 (F) F=Forecast Source(s): International Monetary Fund

6 On the Whole, A Mixed But Improving Picture for Global Manufacturing Growth Select Economies, Forecast of Manufacturing/Industrial Production Growth World United Kingdom Eurozone Percent Japan China Asia, ex Japan Brazil Mexico Source(s): Consensus Forecasts and MAPI Foundation

7 U.S. Manufacturing Growth Strengthens as An Improving Global Economy and a Falling Dollar Spur Factory Activity U.S. Manufacturing Production Growth, Annual Percent Change, Seasonally Adjusted Percent Q Q Q Q Q Q Q Q Q Q Q Q Q Q2 Source(s): Federal Reserve Board

8 MAPI Foundation Forecast: The Era of Moderate Economic Growth Continues in the U.S. U.S. GDP Growth, Inflation-Adjusted Percent (F) 2018 (F) 2019 (F) 2020 (F) F=Forecast Source(s): U.S. Bureau of Economic Analysis and MAPI Foundation

9 U.S. Political/Policy Risk and Geopolitical Tensions Guide the Pessimistic Growth Scenario. A Strong Coordinated Global Upturn Guides the Optimistic Outcome. U.S. Manufacturing Forecast, Alternative Global Growth Scenarios, Projected Average of U.S. Manufacturing Growth for Percent Basline Pessimistic Optimistic Non-U.S. Advanced Country GDP Developing Country GDP U.S. Manufacturng Growth Source(s): MAPI Foundation

10 MAPI Foundation Forecast: Modest Outlook for the Drivers of Manufacturing Activity U.S. Manufacturing Production Growth 5 4 Annual Percent Change (F) 2018 (F) 2019 (F) 2020 (F) Exports Business Equipment Investment F=Forecast Source(s): MAPI Foundation

11 The Resulting Dollar Reversal Grows as an Outlook Issue U.S. Broad Nominal Dollar and Dollar Versus Major Currencies Index: January 1997= Index March 1973= Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Broad nominal dollar Dollar vs. major currencies Source(s): Federal Reserve Board

12 Hints of Stronger U.S. Export Demand From a More Stable World U.S. Total Export Growth, Annual Rate, Seasonally Adjusted Percent Q Q Q Q Q Q Q Q Q Q2 Source(s): U.S. Bureau of Economic Analysis

13 MAPI Foundation Forecast of U.S. Growth of GDP and Components GDP Expenditure Categories Inflation-Adjusted Percent Change (F) 2017(F) 2018(F) 2019(F) 2020(F) Gross Domestic Product Total Consumption Durables Nondurables Services Nonresidential Fixed Investment Equipment Information Processing Equip Industrial Equipment Transportation Equipment Intellectual Property Products Structures Residential Fixed Investment Exports Imports Federal Government State & Local Government F=Forecast Source(s): MAPI Foundation, August 2017

14 MAPI Foundation Baseline Forecast of U.S. Manufacturing Output Growth Percent Change or Level as Specified Economic Indicators (F) 2017(F) 2018(F) 2019(F) 2020(F) Manufacturing Computers & Electronic Products Non-high-tech Manufacturing F=Forecast Source(s): MAPI Foundation, August 2017

15 MAPI Foundation Forecast of Output Growth in Consumer-Related Industries Industry Inflation-Adjusted Percent Change (F) 2017(F) 2018(F) 2019(F) 2020(F) Motor Vehicles & Parts Petroleum & Coal Products Plastic Products Logging Wood Products Furniture & Related Products HVAC Equipment Textile Product Mills Paints, Soaps, Toiletries & Misc Food Apparel Pharmaceuticals & Medicines F=Forecast Source: MAPI Foundation, August 2017

16 MAPI Foundation Forecast of Output Growth in Investment-Related Industries Industry Inflation-Adjusted Percent Change (F) 2017(F) 2018(F) 2019(F) 2020(F) Electric Lighting Equipment Electrical Equipment Architecture. & Structural Metals Construction Machinery Engines & Turbines Agricultural Equipment Drilling Equipment Metalworking Machinery Industrial Machinery Heavy Duty Trucks Medical Equipment & Supplies Forging & Stamping Aerospace Products & Parts Ship & Boat Building F=Forecast Source: MAPI Foundation, August 2017

17 MAPI Foundation Forecast of Output Growth in Materials-Related Industries Industry Inflation-Adjusted Percent Change (F) 2017(F) 2018(F) 2019(F) 2020(F) Paper Iron & Steel Alumina & Aluminum Glass Resins & Synthetic Organic Chemicals Inorganic Chemicals Agricultural. Chemicals F=Forecast Source: MAPI Foundation, August 2017

18 European Manufacturing Leapfrogs America s Performance Global Manufacturing Output Growth, Year-Over-Year Percent Y/Y Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q2 Germany Eurozone U.S. Source(s): OECD

19 European Mining Outlook Subdued Eurozone and Germany, Mining Output Growth, Year-Over-Year Percent Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q2 Germany Eurozone Source(s): Eurostat

20 Truck Production Decelerates in Europe Eurozone and Germany, Truck Production Growth, Year-Over-Year Percent Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q2 Germany Eurozone Source(s): Eurostat

21 European Rolling Stock in the Doldrums but Recovery Not Far Away Eurozone and Germany, Locomotives and Rolling Stock, Production Growth, Year-Over-Year Percent Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q2 Germany Eurozone Source(s): Eurostat

22 China s Slowdown: It s Over! China s Annual GDP Growth Percent Source(s): National Bureau of Statistics of China

23 Dodging the Bullet on a China Investment Contraction China s Fixed Asset Investment, Purchase of Equipment and Tools Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Year to Date Percent Change (Year/Year) Jul-17 Source(s): National Bureau of Statistics of China

24 The Chinese Manufacturing Slowdown Has Reached a Bottom China s Growth of Industrial Value-Added Percent (Year/Year) Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Source(s): National Bureau of Statistics of China

25 Key Takeaways Growing signs of a coordinated but modest global growth improvement. The falling dollar adds a tailwind for U.S. manufacturing at a time of global economic strengthening. MAPI Foundation baseline forecast calls for an average of 1.7% U.S. manufacturing growth While modest, this is a meaningful acceleration from the nearly stagnant period. U.S. political/policy shocks, Brexit uncertainty, and the confrontation with North Korea are the principle risks to the U.S. manufacturing outlook. The impact of the hurricane Harvey will take some time to assess but will vary by subsector.