Economic Report: New Year, Same Challenges: Supply Chains & COVID-19

AICC, through its membership in the Council of Manufacturing Associations, is pleased to present the "Monday Economic Report" from the NATIONAL ASSOCIATION OF MANUFACTURERS (NAM).

By Chad Moutray, Ph.D., CBE – February 11, 2022

NAM Economic Toplines: 

• The J.P. Morgan Global Manufacturing PMI declined from 54.3 in December to 53.2 in January, the weakest reading since October 2020. Supply chain constraints, raw material shortages and the spread of the omicron variant slowed activity in markets around the world. Input and output prices have decelerated for the third consecutive month following October’s record pace, but manufacturers expect production to improve over the coming months to increase solidly over the coming months.

• Six of the top nine markets for U.S.-manufactured goods had expanding manufacturing sectors in January, down from seven in December. China’s manufacturers reported contracting activity for the third time in the past six months, pulling back from December’s rebound and joining Brazil and Mexico in negative territory.

• Real GDP in China grew 4.0% year-over-year in the fourth quarter, the weakest reading since the second quarter of 2020. Supply chain, COVID-19 and property concerns weighed heavily on the Chinese economy for the quarter. Industrial productionimproved in December but remained well below trend. At the same time, fixed-asset investment and retail sales both weakened to post-pandemic lows.

• Real GDP in the Eurozone rose 0.3% in the fourth quarter, slowing from 2.3% growth in the third quarter and pulled lower by supply chain weaknesses and COVID-19 issues. Nonetheless, the IHS Markit Eurozone Manufacturing PMIimproved from 58.0 in December to 58.7 in January on stronger new orders, output and employment growth. The unemployment rate decreased to 7.0% in December, a record low for the Eurozone, for a series dating to January 1995.

• Inflation remains a challenge for manufacturers worldwide. In the Eurozone, industrial producer prices increased 2.9% in December. At the consumer level, inflation rose to a record 5.1% year-over-year in January. Sentiment data suggest that price growth might start to decelerate or is already decelerating in many markets—albeit at very elevated paces.

• The U.S. trade deficit rose to $80.73 billion in December, which was just shy of the all-time high of $80.81 billion recorded in September. Skewed by supply chain disruptions, the U.S. trade deficit reached an all-time high of $859.13 billion in 2021, up from $676.68 billion in 2020.

• The goods trade deficit increased to $101.43 billion in December, a record high, with goods imports jumping to $259.70 billion, also an all-time high. Goods exports rose to $158.27 billion, which was not far from October’s record pace ($159.01 billion). At the same time, the service-sector trade surplus improved to $20.70 billion, the strongest reading since May. 

• U.S.-manufactured goods exports totaled $1,133.25 billion in 2021, using non-seasonally adjusted data, soaring 18.91% from $953.02 billion in 2020. Likewise, manufactured goods imports grew 19.08% from $2,068.29 billion in 2020 to $2,463.03 billion in 2021.

• Manufacturers in the United States are working robustly with the Biden administration and Congress to open markets, enforce trade agreements and address challenges overseas and ensure trade certainty and competitiveness, taking actions that include the following:
  • Continuing to underscore the need for a robust, comprehensive U.S. strategy to address market-distorting economic behaviors by China, while also urging a broadening of eligible products for Section 301 tariff exclusions and improvements to the tariff exclusion process
  • Supporting legislation that bolsters U.S. U.S. competitiveness and ensuring that the final version of the America COMPETES Act and United States Innovation and Competition Act meets the critical needs of manufacturers, including with respect to the Section 301 tariff exclusion process and the Miscellaneous Tariff Bill
  • Urging the Biden administration to stand up for manufacturers facing intellectual property challenges in key markets
  • Underscoring manufacturers’ priorities for the new U.S.-led Indo-Pacific Economic Framework
  • Submitting comments to the Biden administration on U.S.–EU Trade and Technology Council Export Control Priorities

READ MORE