The New Normal Is Modest Growth
Last month, I presented at the Industry & Economic Outlook Conference hosted by the National Fluid Power Association. I focused my presentation on the global manufacturing trends that are important to manufacturers. Below are some highlights from my presentation; you can view my slides here.
Positive factors in the outlook:
- World industrial production should accelerate from slow to modest growth next year.
- An inventory correction is underway (see my latest U.S. Industrial Outlook for more on this subject).
- Commodity prices will rebound; nickel’s trajectory should be particularly impressive through 2020.
- Mining and drilling exploration will bottom out this year and should start showing growth next year. The rig count will start growing before the end of this year.
- Strong U.S. consumer demand is a beneficial buffer from emerging market weakness. Consumers are benefiting from relatively low unemployment, low inflation, low energy prices, and rising disposable income.
- I predict the dollar will remain overvalued for a long time but will gradually depreciate against major currencies, particularly in the 2018-2020 timeframe.
Negative factors in the outlook:
- U.S. manufacturing won’t be fully recovered from the recession until the fourth quarter of 2020. The sector is about 70% recovered right now.
- Foreign trade is depressing U.S. manufacturing growth and will continue to do so. Our trade position is deteriorating in most manufacturing industries. The sector’s overall import to export ratio worsened from 1.58 in 2013 to 1.74 in 2015.
- Post-Brexit, forecasters revised down their predictions for UK manufacturing production growth; the Brexit will have little impact on economic growth in the U.S. and EU.
- Emerging market growth is still decelerating.
- Investment in Latin America is being held back by a depression in Brazil and low commodity prices, as well as a slow pace of economic reforms.
- Business investment is being held up by risk aversion.
Interested in having a MAPI Foundation economist speak at your conference or senior management meeting? Email me. Our team regularly delivers customized presentations virtually and in person at events.