Talking Candidly About a Tough World Economy
I recently had the pleasure of being a guest on Manufacturing Talk Radio with hosts Tim Grady and Lew Weiss. These two gentlemen deserve great credit for being something that the U.S., and indeed the world, needs a lot more of—entrepreneurs. They have filled a much-needed gap in business news by creating a show entirely devoted to the concerns of the manufacturing sector and have done so with humor and energy. I have appeared a number of times on their program and have always enjoyed the experience.
Unfortunately, there is no humor and very little energy in the global business environment, a hard truth that formed the basis for the one-hour program. This is the most difficult world economic picture that U.S. manufacturers have faced since 2008. China’s protracted slowdown appears to be worsening, although as I told my hosts, that country can be an enigma wrapped in a mystery. What worries me the most is not any one indicator but the rather crude way that they appear to be managing the transition to slower growth and to growth that is more balanced between manufacturing and services and between consumer spending and investment. The world has a right to be nervous when its second largest economy is being managed by policymakers who are years behind their own economic reality.
China’s slowing is exacerbating the already difficult economic picture in other emerging markets such as Brazil and Russia, both of which are in significant recessions. Canada, a commodities exporter, has also lapsed into a downturn. Aggressive monetary policy has stabilized the deflation risk in the Eurozone, but it remains a mixed picture, at best. As I told Tim and Lew, deflation, which is the economically toxic circumstance of falling prices, is the true economic fear in the current world picture.
As central banks outside of the U.S. try to stimulate their economies by targeting lower exchange rates, the U.S. wins the “prize” of a higher dollar. U.S. manufacturers, already challenged by global weakness, needed an elevated greenback like a hole in the head. MAPI expects U.S. manufacturing growth to accelerate from an essentially flat first half of 2015. But there is no denying that this is a rough period for domestic goods producers.
Many thanks to Manufacturing Talk Radio for having me on. I’m sorry for the grim picture. I’ll try to do better next time.