The chart of the week is from Ryan Connelly, Senior Analyst for Global Economics:
“I think most of our clients are aware that developed markets have picked up in the past year, but the sharp rebound in manufacturing growth since mid-2016 has really taken markets by surprise. It hasn’t just been Germany: The US and Eurozone in aggregate have both seen manufacturing growth far exceed global averages. This is clearly a bullish sign for these economies, as PMI has historically been a pretty good indicator of economic performance.
So in the short term, it makes sense to position to take advantage of growth opportunities in developed markets. But MNCs should also take this time to take stock of the medium-term changes that are going on in global manufacturing. Our China analyst already pointed out in his piece on “The Future of APAC Manufacturing” that, due to cost-cutting automization, China and other APAC economies like S Korea and Japan were likely to retain their manufacturing footprint despite rising wage pressures. The same could take place in developed markets: Germany has long had a strong manufacturing sector, and the US tax plan provides incentives for MNCs to invest in new capital-intensive manufacturing facilities in the US. The model of ‘trickle down’ manufacturing as economies shift from low-income to middle-income status might be coming to an end.”
Have a question for Ryan? Send him an email