The virtuous loop between activity in the manufacturing sector and world trade


The world trade rebound will continue in the forthcoming months. That’s what the graph between world trade growth and the Markit index suggests. The robust level of the manufacturing index is consistent with a stronger momentum on world trade.
Every region of the world shows an improvement in the manufacturing activity according to Markit. This will support a balanced growth scheme at the world level.A higher Markit index will boost trade and therefore world growth.


The momentum at the world level is strong and robust. The Euro Area is in a catchup period with a high momentum on new orders and on employment. The business cycle is virtuous. There are reasons to be optimistic on the Eurozone environment.
The situation is more specific in the US after hurricanes. The most important contributor to the ISM increase is the item on delivery. There were strong needs and it was difficult to deliver due to disruption and delays.
The situation is robust in Japan and the Brits are still optimistic on their activity.
Indices for emerging countries are robust. The situation is good for emerging countries: growth in developed countries + higher commodity prices + growth in China is steady + good financial conditions (the impact of Fed’s hikes on interest rates have been very limited)
The marginal slowdown is associated with a marginally lower index in China.


Euro Area – Robust Momentum in the Manufacturing Sector (June 2017)

Strong profiles for Markit indices for the manufacturing sector in the Euro Area. This reinforces growth prospects for the region. All countries are growing even Greece for which the index is above 50 for the first time in a year (but only one month June2016). France is now marginally above Spain and Germany is very robust. The consistency of all these indices will improve trade within the Euro Area feeding economic expansion

New orders momentum is getting stronger at the end of the second quarter. This should lead to a strong acceleration in the manufacturing production index in the months to come. This will feed trade and growth.
At a disaggregated level, Germany has the strongest dynamics for orders. Italy and France are trending upward and Spain is in a robust trend, but not an accelerating one.
Pressures on prices are weaker in June. This is linked to lower oil prices. This will reduce tensions on the production price index. The ECB will not see higher inflation momentum and has no reason to change its mind.

Employment and Activity in the US Manufacturing Sector

Yesterday, in the Wall Street Journal (see here), Kathleen Madigan noticed that there was “no renaissance for manufacturing jobs”. And her chart is convincing. It shows the manufacturing production index and manufacturing employment since the business cycle trough in June 2009. The production index on the period is up by 25% and jobs by only 3.2%. Clearly the job recovery is weak, almost non-existent.
USA-Manuf-Act-jobs-J2009But is it different from the past? Continue reading