Global manufacturing growth decelerated in 2018 as a result of trade and tariff barriers, according to the UN’s latest International Yearbook of Industrial Statistics.
The publication will be launched on March 7 by the United Nations Industrial Development Organization (UNIDO). It finds that issues involving the US, China and the EU – which together account for over half of global manufacturing production – cut world manufacturing value added by 0.2 percentage points in 2018 versus 2017 as growing uncertainty from the trade war and Brexit put the brakes on investment.
Last year, G20 economies applied a record number of trade-restrictive measures between mid-May and mid-October, prompting the World Trade Organization (WTO) to call for immediate action to de-escalate global trade conflicts. However, as the first quarter of 2019 draws to a close, the situation looks not to have improved. In a note looking at the 30 countries for which IHS Markit produces manufacturing PMI data, Chris Williamson, the research firm’s chief business economist, highlights that 13 are now in manufacturing downturns as at the end of February, up from 11 in January, and just two this time last year.
“Notable economies in manufacturing decline now include Germany, which recorded the steepest export fall of all countries, China and Japan. Both the eurozone and Asia as a whole are consequently now in manufacturing downturns. Growth also slowed sharply in the US and to a lesser extent in Canada, pushing North American growth to an 18-month low,” the note says.
Overall, output growth has slowed to its lowest since June 2016, down to levels “broadly consistent with global manufacturing output growth stalling”, adds Williamson.
As home to six of the 13 economies in manufacturing decline, including both China and Japan, Asia is the hardest-hit region by the slowdown. On top of global trade tensions, the region is also having to contend with weaker Chinese import demand and a slowdown in the ICT cycle, which is hurting its electronics exporters. “While positive trade negotiations between the US and China may provide some relief, we do not expect the increase in trade protectionism over the past year to vanish any time soon,” says Sian Fenner, lead Asia economist at Oxford Economics.
With these latest figures, it appears clear that the IMF was not too far off the mark with its ominous predictions for the global economy, as the consequences of tariffs, trade wars and anti-free trade policies start to be felt.