Manufacturing Weekly Economic Highlights | 25 November 2024
Welcome to our weekly manufacturing and economic newsletter, providing key insights and analysis on the latest developments in the global market. Stay updated and make informed decisions!
In this edition, we focus on the economic conditions in America, Europe, China, Thailand, as well as updates on the energy and logistics markets.
Americas
“DXY advanced moderately higher again this week”
“US PMI powers to 55.3 buoyed entirely by services sector growth”
“US Manufacturing PMI struggles amid contraction at 48.5 . . .”
“. . . but eagerly anticipates eased regulatory burdens under Trump”
“The United States will not tolerate forced labor in the goods entering our markets”
The USD Index (DXY) finished moderately stronger again this past week, from 106.67 on 15 November 2024 to close at 107.49 on 22 November 2024. The DXY is up 0.75% for the week, up 3.10% for the month, up 6.08% YTD, and up 3.95% over the past 12 months.
The US economy outperformed its global peers in November, with the composite Purchasing Managers Index (PMI) powering from 54.1 to 55.3 to its highest level since April 2022, as reported on 22 November by The Sunday Times.
The PMI measures activity in the private sector, with any value over 50 indicating expansion.
US economic growth was driven almost entirely by the services sector, with the PMI services sector sub-index rising to a 33-month high of 57.0.
The PMI manufacturing sector sub-index rose modestly from 48.5 in October to 48.8 in November. Business conditions in the manufacturing sector deteriorated for the fifth consecutive month, with production falling at an increased rate. However, the rate of lost new orders and the rate of inventory contraction fell and sector employment rose for the first time in four months. Supplier delivery times lengthened at the highest rate in 25 months, linked to the forward ordering of inputs ahead of potential tariff increases, as reported on 22 November by Trading Economics
The monthly PMI survey reported that “respondents also often cited a more business-friendly incoming administration as beneficial to the outlook, notably in terms of looser regulation and protection measures, the latter helping boost sentiment, particularly in manufacturing.”
The UK composite PMI fell to 49.9 and the EU PMI was 48.1.
The US PMI value suggests that the US economy is set to achieve 4Q24 GDP growth of 2.5% YoY, down from 2.8% YoY in 3Q24.
Growing confidence in the US economy following Trump’s election victory buoyed the USD to its highest level since July 2022.
Meanwhile, Bloomberg reported on 22 November that its survey of economists predicts the US Fed will take a “more measured approach to interest-rate cuts next year amid stubborn inflation and limited prospects that price pressures can cool much under President-elect Donald Trump.”
The Core Personal Consumption Expenditures (PCE) price index is forecast to average 2.3% in 2025, an increase of 100 bp from the October survey.
Economists anticipate a 25 bp Fed rate cut in December, with no cut in January, and a full year 2025 Fed policy rate of 3.25% to 3.5%.
Nationwide Mutual Insurance Co., Chief Economist Kathy Bostjancic said, “We have only made a moderate upward adjustment to our inflation forecast for 2025 to account for an additional 30% increase in tariffs being levied against China. We feel it is premature to assume any other changes to tariff and immigration policies and we will need to wait to see what the new administration proposes and is eventually enacted.”
Economists also raised their US 2025 GDP forecast from 1.8% last month to 2.0% in November reflecting stronger expectations for consumer spending.
Reuters reported on 22 November that the US has banned more than 30 additional Chinese food, metal, and other goods manufacturers for allegedly using forced labor involving the Uyghurs.
Twenty-three of the companies are in the agricultural sector and produce products including tomato paste and walnuts. Materials sector companies added to the list mine, smelt, and process copper, lithium, beryllium, nickel, manganese, iron ore, and gold.
The total number of companies listed on the Uyghur Forced Labor Prevention Act Entity List has grown to more than 100 since the Uyghur Forced Labor Prevention Act was enacted in December 2021.
US Homeland Security Undersecretary for Policy Robert Silvers said, “Today's enforcement actions make it clear -- the United States will not tolerate forced labor in the goods entering our markets. We urge companies to take responsibility, know their supply chains, and act ethically.”
Europe
“EUR retreated moderately lower again this week relative to the USD”
“EUR falls to 2-year low amid political turmoil and continued economic weakness”
“German output continues to stagnate with 2024 GDP forecast to contract 0.1%”
“Throw in the election of Donald Trump and it is no wonder the [EU] economy is facing challenges”
The EUR finished moderately lower again this week, from $1.055 USD on 15 November 2024 to close at $1.042 on 22 November 2024. The EUR is down 1.17% for the week, down 3.51% for the month, down 5.62% YTD, and down 4.84% over the past 12 months.
The EUR deflated to a two-year low this week amid political turmoil in Germany and France and the aforementioned 48.1 EU PMI index, as reported on 23 November by the Daily Mail.
Investors are increasingly concerned about lackluster growth and are anticipating the European Central Bank to cut its policy rate by 25 bp in December from 3.25% to 3.0% for the fourth rate cut of 2024, with future cuts reducing the ECB policy rate to 1.75 by year-end 2025.
Bosch announced on 22 November that it will cut 3,500 jobs in Europe including positions developing new vehicle technology.
Ford announced on 20 November that it is cutting 4,000 European jobs representing 14% of its European workforce amid “significant losses.”
Europe’s biggest automaker Volkswagen has previously indicated it expects to close up to three European factories.
Hamburg Commercial Bank Chief Economist Cyrus de la Rubia, said of the EU PMI data, “Things could hardly have turned out much worse. The manufacturing sector is sinking deeper into recession, and now the services sector is starting to struggle after two months of marginal growth. It is no surprise, given the political mess in the biggest eurozone economies lately. France's government is on shaky ground and Germany's heading for early elections. Throw in the election of Donald Trump and it is no wonder the economy is facing challenges.”
Hamburg Commercial Bank compiles the EU PMI data.
ING Bank Chief Economist Bert Colijn said, “The November PMI is another wake-up call for eurozone policymakers that the economy continues to show signs of weakness. New business is weakening again for manufacturing and services with export orders in particular being down sharply as the eurozone economy battles weak demand from abroad.”
Meanwhile, ECB VP Luis de Guindos warned that high levels of sovereign debt could consign European countries to low growth, as reported by Bloomberg on 18 November.
“Fiscal slippage or questions around fiscal consolidation paths could trigger further repricing of sovereign risk. Current large primary deficits will also make it harder for governments to support the economy if adverse shocks materialize. The balance of macro-risks has shifted from concerns about high inflation to fears over economic growth. Inflation has moved closer to our 2% target.”
Bloomberg reported on 22 November that Germany’s private sector activity further contracted in November, with the German composite PMI falling from 48.6 in October to a nine-month low of 47.3 in November.
Hamburg Commercial Bank Chief Economist Cyrus de la Rubia, said, “These figures are bad news. Until recently, the German economy was stabilized somewhat by the service sector, which was making up for the steep decline in manufacturing. Not anymore. The political uncertainty, which has increased since Donald Trump’s election as US president and the announcement of snap elections in Germany on Feb. 23, isn’t helping.”
The German Bundesbank said that German output will likely stagnate in 4Q24 with the country on track for a second consecutive full year of contraction.
Bloomberg reported on 18 November that its most recent economists survey forecasts German GDP contracting 0.1% in 2024 following a contraction of 0.3% in 2023.
The survey forecast 2025 GDP to expand 0.7%, down from its October forecast of 0.8%, with 2026 GDP forecast to grow 1.3%.
China
“The CNY finished modestly lower again this week”
“Chinese exporters are ‘preparing for the worst’ following Trump’s election victory”
“Loss of MFN trade privileges could cut Chinese GDP by 30 to 150 bp”
“69% of surveyed companies are reshoring their Chinese operations . . .”
“ . . . with India as top destination choice at 39%”
The CNY ended modestly lower again this week, from 7.230 per USD on 15 November 2024 to close at 7.243 per USD on 22 November 2024. The CNY is down 0.17% for the week, down 1.70% for the month, down 1.82% YTD, and down 1.30% over the past 12 months.
Chinese export-dependent business owners are “preparing for the worst” in anticipation of potential trade protectionist policies that could be enacted under the incoming Trump administration, as reported on 23 November by Barron’s.
China’s manufacturing sector expanded in October as exports grew at the fastest pace in over two years due primarily to forward-loaded orders to beat anticipated tariff increases by the US and EU.
“China’s exports to the US are dominated by electronic equipment, machinery, vehicles, plastics, irons and steel, furniture, apparel, and toys and games, according to Chinese official statistics.”
China’s economic policies have given rise to a manufacturing industry with capacity far exceeding even the most optimistic domestic demand. However, Chinese consumer confidence has languished since the Covid pandemic.
China currently enjoys Most-Favored-Nation (MFN) trade status with the US which provides the lowest US tariff rates on many products. If the US revokes MFN status, China’s GDP growth could be cut by 30 to 150 basis points in 2025, while the US would see its GDP growth cut by 10 to 20 basis points, based on a study by the Peterson Institute.
The tariffs implemented during the first Trump administration reduced China’s MFN trade benefit by one-third.
Meanwhile, Fortune reported on 18 November that the “corporate exodus from China is gaining momentum.”
Based on a Bain & Company survey of 166 CEOs and COO’s, the share of companies moving operations out of China increased from 55% in 2022 to 69% in 2024.
The top relocation destination is India at 39%, followed by the US and Canada at 16%, SE Asia at 11%, Europe at 10%, and Latin America at 8%.
The share of executives planning to reshore operations to bring supply chains closer to markets surged from 63% in 2022 to 81% in 2024. This also included “the emerging trend of ‘split-shoring’ where there’s a mix of offshore production and manufacturing close to home.”
Growing geopolitical uncertainties and rising costs were commonly cited factors driving relocation from China.
US companies also cited the 2022 Inflation Reduction Act and the CHIPS Act as factors in their reshoring decisions.
Thailand
“The THB rebounded moderately higher this week”
“Thai 3Q24 GDP up 3.0% YoY”
“Thai 2025 GDP forecast at 2.3% to 2.8%”
“Factory utilization 58.29%”
“Thailand is ready with a stable government. This is the right moment [to invest]”
The THB ended moderately higher this week, from 34.80 per USD on 15 November 2024 to close at 34.47 per USD on 22 November 2024. The THB is up 1.01% for the week, down 2.35% over the past month, down 0.26% YTD, and up 2.49% over the past 12 months.
The Thailand Office of the National Economic and Social Development Council (NESDC) announced that the Thai economy expanded in 3Q24 at 3.0% YoY and 1.2% QoQ, up from 2.2% YoY in 2Q24.
In the first nine months of 2024, the Thai GDP was up 2.3%.
Total investment increased by 5.2% in 3Q24, up from a contraction of 6.1% YoY in 2Q24 and the first increase in total investment in four quarters.
Private investment dropped 2.5% YoY in 3Q24 due primarily to tightened credit standards imposed by financial institutions amid high household debt of 90%. Public investment grew 25.6% YoY.
Exports grew in 3Q24 at 8.9% YoY on strong manufacturing and agricultural sales. Export volume increased 7.5% YoY.
Imports increased by 11.3% YoY, up from 1.2% YoY in 2Q24 with growth seen in all categories.
Thailand’s trade balance recorded a surplus of $5.8 billion USD in 3Q24, up from $5.5 billion USD in 2Q24.
Thailand’s manufacturing sector grew by 0.1% YoY in 3Q24, following a rise of 0.3% YoY in 2Q24. However, the sector remains down 0.9% YoY during the first nine months of 2024.
Growing manufacturing categories include electronic components and boards, computers and peripherals, general purpose machinery, and refined petroleum products. Contracting categories include motor vehicles, concrete, cement, and plastic articles, basic iron and steel, and motorcycles.
The average capacity utilization rate was 58.29% in 3Q24, up from 57.79% in 2Q24 but down from 58.37% in 3Q23.
The NESDC projected the Thai 2024 GDP to expand 2.6% YoY, with headline inflation at 0.5% YoY and a record current account surplus of 2.5% of GDP.
For 2025 the NESDC projects the Thai economy to expand 2.3% to 3.3% with a midpoint of 2.8% YoY, supported by increased government consumption and investment, growth of domestic private demand, continual recovery in the tourism sector, and continual export expansion.
Private consumption in 2025 is expected to grow 3.0% with investment growing by 2.8%. Exports are expected to grow 2.6% based on USD value, and headline inflation is expected to be in the range of 0.3% to 1.3%.
Thailand is expected to again have a record current account surplus in 2025 at 2.6% of GDP.
Reuters reported on 19 November that Thailand’s flagship “Digital Wallet” stimulus program will begin its second phase of disbursements in January.
The first phase of the Digital Wallet program distributed THB 10,000 (approx. $290) to each of 14.5 million Thai welfare card holders and disabled citizens beginning in late September.
The second phase will distribute THB 10,000 to 4 million additional Thai citizens over 60 years old to help boost consumption, to be completed by late January.
The program ultimately seeks to provide THB 10,000 to each of 45 million Thais.
Forbes reported on 21 November that Thailand PM Paetongtarn Shinawatra says "this is the right time to invest in Thailand."
She wants to attract additional technology infrastructure investments from leading global companies such as Google and Microsoft.
She said, “Thailand is ready with a stable government. This is the right moment.”
In September Google announced plans to invest $1 billion in Thailand to build new cloud computing infrastructure. Amazon Web Services has plans to invest $5 billion on data centers in Thailand by 2037. Microsoft has also committed to build AI computing facilities.
Paetongtarn also said, “we need to make sure that we are ready for the investment. We want to be the country for future businesses like data centers and semiconductors.”
“The area that has not been recognized enough is the quality of craftsmanship in Thailand. I want the world to see how talented Thai people are. That’s why I go around the world wearing Thai fabric all the time because I feel proud.”
Commodities
“GSCI Commodity Index rebounded moderately higher this week”
“The GSCI Industrial Metals Index ended modestly lower again this week”
“Arkansas huge lithium find could make the US lithium independent . . .”
“. . . but can the deposit be commercialized amid excess supply and weak demand?”
The GSCI Commodity Index finished moderately higher this week, from 527.19 on 15 November 2024 to close at 547.19 on 22 November 2024. This index is a weighted index based on world-production of each commodity in the index, with energy and industrial metals comprising the bulk of the index weighting. The GSCI is up 3.68% YTD. Trading Economics has maintained its GSCI forecast this week at 532 by the end of 4Q24 and 510 in 12 months.
The GSCI Industrial Metals index finished modestly lower again this week, from 449.60 on 15 November 2024 to close at 448.91 on 22 November 2024. The Industrial LME Metals Index is up 9.9% over the past 12 months.
The US Geological Survey released a study in October revealing a huge deposit of lithium in the US state of Arkansas, as reported on 23 November by The Globe and Mail.
The deposit contains between five and nineteen million tons of lithium, which could be nine times the expected global demand for lithium for EV batteries by 2030.
The deposit contains enough lithium to make the US lithium-independent, offsetting imports from Australia, Chile, China, and Argentina, with sufficient excess capacity to support lithium exports.
However, as reported in this newsletter last week, “the lithium market remains beset by excess production amid lower than forecast demand as the EV market growth remains sluggish.”
Energy
“Crude rebounded moderately higher this week”
“Henry Hub ended moderately higher again this week”
“EU Natural Gas ended moderately higher again this week”
“Oil prices are being driven primarily by risk premium despite a growing supply glut”
“Rapidly depleting gas reserves and looming supply cuts from Moscow have the makings of a fresh energy crisis for Europe”
Brent Crude finished moderately higher this week, from $71.05 USD on 15 November 2024 to close at $75.28 USD on 22 November 2024.
Henry Hub finished moderately higher again this week, from $2.84 USD per MMBTU on 15 November 2024 to close at $3.12 USD per MMBTU on 22 November 2024.
EU Natural Gas finished moderately higher again this week, from €45.71 on 15 November 2024 to close at €46.89 on 22 November 2024, equivalent to $13.20 USD per MMBTU. EU Natural Gas is up 44.96% YTD. Trading Economics maintained its EU Natural Gas TTF forecast this week at €40.35 per MWH by the end of 4Q24 and 43.49 in 12 months.
Brent crude climbed 5.8% this week for the biggest gain since early October driven by a rising risk premium, as reported on 22 November by MarketWatch.
Sevens Report Research said in its 22 November newsletter, “The resurgence in geopolitical tensions is serving as a bullish catalyst, but it is not an influence that will persist in perpetuity. The reality of weakening economic trends amid a growing amount of sidelined supply is likely to send [WTI] futures back below $70 and even below $60 in the months ahead.”
“Conversely, a more meaningful rise in geopolitical tensions that threaten, or worse, directly impact, regional oil and gas infrastructure in Eastern Europe and Russia has the potential to send oil back beyond $80.”
Saxo Bank Head of Commodity Strategy Ole Hansen said, “Overall, I believe the weak demand outlook highlighted by the dismal manufacturing PMI in Europe today remains a key factor which has helped offset strengthening refinery margins amid a Northern Hemisphere cold spell and a non-quantifiable geopolitical risks related to the Russia-Ukraine escalation.”
Markets are waiting on the outcome of the OPEC meeting on 1 December. In November OPEC extended its 2.2 million bpd voluntary output cuts until the end of December.
CME Group’s OPEC Watch tool products a 44.95% probability of no change to production plans, and 55.05% that the group will further delay an increase in output.
Meanwhile, forecasts of colder weather, the escalation of the Russia – Ukraine war, and Trump’s victory in the US election contributed to a 11% increase in US natural gas prices to the highest price in a year.
Markets are bullish on Trump’s impact on long-term gas prices because his administration is likely to encourage more natural gas demand while also reducing regulations around permits for both pipeline and LNG export facilities.
Bloomberg reported on 23 November that “Rapidly depleting gas reserves and looming supply cuts from Moscow have the makings of a fresh energy crisis for Europe, which is still reeling from extreme shocks two years ago.”
European gas prices have surged 45% YTD amid growing hostilities in the Ukraine war.
In 2024 through October European natural gas inventories were significantly above the five-year average. However, in November gas inventories have started their winter season drawdown a few weeks earlier and at a greater rate than the five year average and have dropped below the five year trendline.
RWE AG CEO Markus Krebber said, “We still have problems with gas supply. If we really want to be independent of Russian gas, we need to have more import capacity and we will probably see this again this winter because gas storage facilities are emptying quite quickly as we have a cold start to the winter."
Global Risk Management Chief Analyst Arne Lohmann Rasmussen said, “This is beginning to resemble a 2022 scenario in which the EU purchased gas at any price. Next year, this could potentially occur during a year of strong Asian demand.”
Saxo Bank AS Head of Commodity Strategy Ole Hansen said, “once again, the energy-intensive economies, led by Germany, will suffer the most, hurting an economy already reeling from trouble in its car, chemical and machinery sectors.”
“There is an increased risk that Europe’s luck, regarding mild weather, may run out this coming winter. We are in other words forced to rely on LNG imports and with that the need to stay competitive with Asia.”
Logistics
“The BDI sank significantly lower this week”
“The CFI bounced modestly higher this week”
“Houthis rebels seek to strike an allied warship”
“How much longer will Houthis disruption of Red Sea vessel traffic be tolerated?”
“Mexico plans major expansion of Port of Manzanillo”
Baltic Dry Index finished significantly lower this week, from 1,785 on 15 November 2024 to close at 1,537 on 22 November 2024. The BDI is down 26.6% YTD. Trading Economics has maintained its BDI forecast this week at 1,341 by the end of 4Q24 and 1,166 in 12 months.
The Containerized Freight Index finished modestly higher this week, from 2,251.9 on 15 November 2024 to close at 2,160.1 on 22 November 2024. This index tracks the current freight prices for containerized transport from the most important Chinese ports. The CFI is up 22.76% YTD. Trading Economics has maintained its CFI forecast this week at 2,408 by the end of 4Q24 and 2,751 in 12 months.
“The Houthis appear determined to strike US and allied warships in the Red Sea,” as reported on 19 November by Business Insider.
The US and Europe are maintaining a significant naval presence in the Red Sea to suppress the Houthis rebels. Despite launching more than 130 attacks targeting both civilian and military vessels, they have yet to strike a Western military vessel.
US Special Envoy for Yemen Tim Lenderking said, “Our leadership is all extremely concerned about the Houthis' determination to seemingly strike us — to strike our friends — in the Red Sea, their perseverance in doing so, their determination to do what they've been doing better.”
The Houthis have sunk two commercial vessels and hijacked one, whose crew has been held hostage in Yemen for nearly one year.
Pentagon Press Secretary Maj. Gen. Pat Ryder said, “We will continue to make clear to the Houthis that there will be consequences for their illegal and reckless attacks.”
Commercial shipping through the Red Sea typically accounts for 15% of international maritime trade. Houthis attacks have forced many of these vessels to take longer and more expensive voyages around Africa.
Bloomberg reported on 23 November that Mexico has announced a $2.7 billion USD expansion of its Navy-run Port of Manzanillo, located on the Pacific Ocean in the western state of Colima. This expansion would lift the port into the top 20 container ports in the world, from 53rd position in the most recent Lloyd’s List Ranking, and would make it the busiest port in Latin America.
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