Manufacturing sector health varies widely by country in early 2019.
It’s hard to take the pulse of the global manufacturing industry as the first month of 2019 draws to a close. That’s because data coming out of different world regions paints starkly different pictures. While the ebbs and flows of the global economy are often mirrored from place to place, newly publicized information indicates the opposite is happening early this year. Three recently released reports—the December jobs report from the United States and manufacturing purchasing manager index (PMI) data from Germany and Japan—send mixed messages about the outlook for manufacturing in these respective countries.
The Good: U.S. Manufacturing Job Growth
At least by one metric, the picture looks brighter for U.S. manufacturing today than at any point in the past 20 years. The sector gained 284,000 jobs over the course of 2018, its best full year performance since 1997. In its December 2018 jobs report, the Bureau of Labor Statistics also said that 32,000 of those net job gains came in the last month of the year alone, pointing to an acceleration of the growth trend. With more than 2 million manufacturing jobs expected to go unfilled in the country over the next 10 years, demand doesn’t look like much of a constraint for manufacturers in the world’s largest economy.
The Bad: German Market Contraction
Things aren’t so rosy for another traditional manufacturing powerhouse. The IHS Markit manufacturing purchasing managers’ index in Germany slipped to 49.9 this January, down from 51.3 a month earlier and its lowest in 4 years. That 49.9 number is an especially notable benchmark because it’s below the score of 50 that separates expansion from contraction. Demand does appear to be a concern here, as German manufacturers are experiencing their slowest influx of new work since 2012. The backlog of manufacturing orders shrunk most sharply in the automotive sector, long considered a principal driver of Europe’s most robust economy. This softening in the auto industry, coupled with continued growth concerns from Chinese customers, was enough to pull the sector as a whole into contraction territory.
The Question: Where is Global Manufacturing Headed?
Perhaps the best word to characterize the global manufacturing sector in early 2019 is “uncertain.” Many variables are at play that have the potential to drastically alter the outlook for the worldwide economy in general, and manufacturing in particular. The organic slowdown in Asian market growth, trade friction between the U.S. and China, and political turmoil in Europe are all issues that will alter the prospects of producers worldwide. Given the global nature of these matters, it’s a foregone conclusion that manufacturing in every country will be impacted. What’s harder to discern is what type of change their resolution might bring.
