Global Macro: Recovery in global industry and trade set to continue – The manufacturing PMIs for March published over the past few days point to an ongoing rebound of global industry and trade from the covid-19 collapse in the first half of 2020. The global manufacturing PMI rose by more than a full point to a ten-year high of 55.0 (February: 53.9). The ongoing rise of this index in recent months is mainly driven by developments in the advanced economies (March 58.5 versus 56.5 in February). Meanwhile, the manufacturing PMI for emerging markets combined (with China as key driver) peaked in November 2020 at 53.9 and has fallen back by around 2.5 points since, although more or less stabilising in March. The further rise of the global manufacturing PMI suggests that the rebound in global industrial production from the severe covid-19 shock in the first half of 2020 will continue. Last December, CPB’s global industrial production index (which lags by a month or two) already had surpassed its pre-corona peak and in January this index was back at 7.4% annual growth (partly reflecting a base effect from the start of the pandemic in early 2020).
Global export PMI at highest level since start of tariff wars – The export subindices of the global manufacturing survey suggest that some temporary weakness over the past months – in part related to the Chinese Lunar New Year – is now behind us. The global exports PMI rose by almost 2.5 points to 53.4 in March (February: 51.0), the highest level since the start in early 2018 of the tariff wars by the previous US administration. The rise in this index was driven by the advanced economies (55.8 versus 54.1 in February), while the index for emerging economies moved back to above the neutral 50 mark (51.0, versus 48.0 in January/February). All this bodes well for global trade, that already showed a remarkable rebound since June 2020 following a collapse in January-May 2020 during the first round of covid-19 related lockdowns. CPB’s global trade volume index was already back at pre-corona levels in November 2020 and pointed to a 5.8% annual growth pace in January.
All in all, the forward-looking manufacturing PMIs published for March suggest that the rebound of global manufacturing and trade from the covid-19 shock goes hand in hand and has further to run in the coming months. This is in line with our base case. We anticipated that virus flare-ups, new mutations and new round of lockdowns in Europe and other parts of the world seen since Q4 2020 would particularly hit the services sectors and would be much less harmful to global manufacturing and trade compared to the first round of lockdowns in early 2020. Moreover, we expect that the recovery of global (final) demand that set in in the second half of 2020 (led by China and the US) will broaden and strengthen in the course of this year, as the rolling out of vaccination programmes will facilitate an easing of covid-19 related mobility restrictions.
Various bottlenecks may slow, not prevent further rebound – Despite this generally constructive outlook for global industry and trade, there are still several bottlenecks that may cap (not necessarily prevent) their rebound. According to the PMI surveys, delivery times have lengthened further (particularly in the advanced economies) and the recent temporary blockage of the Suez Canal may add to this. Moreover, there are more and more signals of a global shortage in semiconductors that will slow production in automotive and other high-tech sectors and could drive up prices as well. On a more positive note, container freight rates for transport from Shanghai to Rotterdam – that had risen more than proportionally since end 2020 due to China concentrated logistical bottlenecks – have gradually moved lower since their peak in mid-February, although still remaining at elevated levels. That lends support to our assumption that these kind of disturbances are mainly a temporary phenomenon, as all kinds of pandemic specific supply and demand disturbances will fade over time. (Arjen van Dijkhuizen)