There are hidden worries about the strong recovery of the global manufacturing industry
Our reporter Yu Yang
Judging from the manufacturing PMI data, the global manufacturing industry as a whole is showing a positive trend, but there are still some uncertain factors worthy of attention.
For example, global logistics and transportation have not yet fully recovered, input costs such as raw material procurement have risen, and supply chain repairs require a longer period. These factors will restrict the recovery of the manufacturing industry.
In order to consolidate the recovery trend of the global manufacturing industry, all economies should strengthen cooperation, provide more support for the development of manufacturing industry, and create a good external environment.
At the beginning of March, the world's major economies concentrated on releasing the Manufacturing Purchasing Managers Index (PMI) for February.
On the whole, the recovery of the global manufacturing industry is strong.
As the global new crown pneumonia epidemic has not been effectively controlled and the demand for the service industry has been severely suppressed, the manufacturing industry has played a more prominent role in promoting the recovery of the global economy, which is expected to accelerate the overall recovery of the world economy.
However, due to the mutation of the new crown virus, the slow recovery of the global supply chain, rising raw material prices and trade protectionism, the foundation for the recovery of the global manufacturing industry is still not strong, and hidden worries still exist. It is necessary for various economies to strengthen cooperation and policy coordination.
Demand release
Multinational manufacturing industry accelerates recovery
From the perspective of manufacturing PMI data, the recovery of the global manufacturing industry is showing a trend of "same frequency resonance".
The U.S. manufacturing PMI in February reached the fastest growth rate in nearly three years; the Eurozone manufacturing PMI climbed to a nearly three-year high, and the manufacturing PMIs of major European economies all returned to above the line of prosperity and decline; the growth rate of the Japanese manufacturing PMI hit a record since 2018 The new high since December of 2009; South Korea’s manufacturing PMI has set a new high in 11 years.
Strong demand is an important factor driving the recovery of the global manufacturing industry.
With the promotion of the new crown vaccine and the decline in the number of new confirmed cases worldwide, market confidence has recovered, economic activities affected by the epidemic have gradually recovered and begun to normalize, and the demand suppressed by the epidemic has been quickly released. These have become the first to pick up in the manufacturing industry. The main driving force.
Jiang Wei, a professor at the International Business School of Southwestern University of Finance and Economics, said that investment demand has contributed to a substantial increase in the output of capital goods, which has played an important role in the recovery of the manufacturing industry.
The increase in manufacturing price levels brought about by demand expansion has further stimulated the growth of manufacturing output and comprehensively enhanced the growth momentum and potential of global manufacturing companies.
At the same time, the sluggish demand in the service industry caused by the epidemic has also brought about a certain "substitution effect."
The suppressed demand for service industries has transformed into demand for manufactured goods, which is more pronounced in regions that have been more severely affected by the epidemic.
In Europe and the United States, the demand for durable goods has grown rapidly, and the demand for manufactured goods such as electronic equipment and home appliances has grown strongly, driving the global manufacturing industry to enter the recovery channel first.
In addition, in response to the economic downturn caused by the epidemic, various economies have successively launched economic stimulus plans, the United States has introduced a new $1.9 trillion economic rescue and stimulus bill, and Europe will continue to increase financial support.
Expansionary fiscal and monetary easing policies have stimulated the rapid rise in manufacturing demand, increased market liquidity and various financial support are expected to accelerate the recovery of the manufacturing industry.
Hidden worries still exist
Uncertainty cannot be ignored
The main factors affecting the prosperity of the manufacturing industry include demand, supply, and corresponding price and policy changes.
On the whole, it is a high probability event that the global manufacturing industry continues to show a recovery trend this year.
However, uncertain factors that may adversely affect the recovery process still cannot be ignored. These factors will also restrict the long-term development prospects of the global manufacturing industry.
"From the logic of the manufacturing recovery, demand, production, and the resulting purchase and inventory changes will all affect the sustainability of the manufacturing recovery. For example, global logistics and transportation have not fully recovered, and input costs such as raw material procurement have risen. It takes a long time to repair the supply chain, and these factors will restrict the production growth of manufacturing enterprises.” said Yu Dianfan, deputy dean of the China Institute of Industrial Development at Shanghai University of Finance and Economics.
Data shows that rising raw material prices have put greater pressure on companies.
At present, the global supply chain is far from returning to its pre-epidemic level.
The production of enterprises in regions that have been more severely affected by the epidemic has not yet resumed, and some economies have also experienced a "labor shortage", which has slowed down the production progress of enterprises and caused an increase in undelivered orders.
At the same time, the shortage of supply has caused the price of raw materials to rise, which has severely squeezed corporate profit margins and is not conducive to the acceleration of the resumption of work and production.
After years of development, the global supply chain has formed a complex supply network. Any problem at any node will have an impact on the global supply chain, thereby increasing the cost of the global manufacturing supply chain and slowing down the recovery speed of the manufacturing industry.
This means that repeated epidemics in any country may have an adverse impact on other companies in the industry chain.
At present, the "core shortage" that has generally appeared in the global automotive industry is a typical case.
Therefore, the synchronization of epidemic prevention and control in countries around the world is also a major challenge facing the recovery of the manufacturing industry.
In addition, affected by economic stimulus policies, rising raw material prices have triggered market concerns about inflation in advanced economies.
The US February ISM Manufacturing Index showed that the payment price index has seen a "disturbing increase", and the cost of raw materials has recorded the largest increase since the 2008 international financial crisis.
Developed economies such as Europe, Japan, and South Korea are also facing the problem of a sharp increase in the cost of manufacturing raw materials. The prices of various commodities produced by many factories are rising, and they are beginning to be transmitted to the consumer side.
If market demand continues to grow, the economic stimulus policies introduced by various economies will cause the prices of raw materials to continue to rise, which will be transmitted to the manufacturing industry, thereby hurting the recovery process.
At the same time, the rapid increase in local debt and the deposition of “zombie companies” caused by subsidies will also bring risks to the recovery of the manufacturing industry.
Strengthen cooperation
Consolidate the foundation for the recovery of the manufacturing industry
For each economy, the manufacturing industry is the foundation of the industrial system and has a strong industrial linkage effect.
Driven by the recovery of the manufacturing industry, production and consumption will become more active, which is expected to accelerate the overall recovery of the world economy.
In order to consolidate the recovery trend of the global manufacturing industry, various economies should strengthen cooperation to provide more support for the development of the manufacturing industry and create a good external environment.
In terms of accelerating the recovery of the global supply chain, Jiang Wei said that all economies should strengthen coordination at the policy level to avoid damaging the growth potential of the manufacturing industry due to the continuous increase in supply chain costs. Major economies should strengthen the coordination of fiscal and monetary policies through deepening Globalization supports the recovery of the manufacturing industry.
Lu Chaofeng, professor of international economics and policy at the School of Finance and Taxation of Southwestern University of Finance and Taxation, and a doctoral supervisor, said that in recent years, due to the continuous influence of trade protectionism, economic globalization has entered a period of adjustment, and there are greater uncertainties in the trade policies of various countries. Development and integration are therefore hindered by various degrees of international barriers, which have brought certain obstacles to the recovery and steady development of the manufacturing industry.
However, the signing of the Regional Comprehensive Economic Partnership Agreement and the completion of the China-EU Investment Agreement negotiations have greatly enhanced the confidence of the manufacturing industry.
This shows that when the world economy is hit hard by the epidemic, all countries should join hands to oppose trade protectionism, further promote economic globalization under the framework of multilateralism, reduce manufacturing costs, and provide more support for the recovery of global supply chains.
Yu Dianfan suggested that companies, on the one hand, can achieve risk sharing and benefit sharing by signing flexible contracts with suppliers; on the other hand, they need to actively adjust their supply chain strategies, establish a diversified supply chain network, and improve supply chain flexibility through digital transformation of the supply chain. Improve enterprise cost control ability and efficiency.
Yu Yang