The decoupling trend of global manufacturing and non-manufacturing industries
2023-04-07
■ Globally, manufacturing conditions continue to deteriorate and remain sluggish, while non-manufacturing shows signs of activity
■ The difference in economic conditions between manufacturing and non-manufacturing is expected to converge again, and this process will also influence the economic cycle
According to the business climate index for March released yesterday, it can be confirmed that the gap between the economic conditions of manufacturing and non-manufacturing industries worldwide is widening. All countries generally showed deteriorating or subdued manufacturing conditions, while non-manufacturing continued to improve.
The US ISM sentiment index (manufacturing: 46.3, non-manufacturing: 51.2) shows that manufacturing has fallen to levels comparable to past recessions, while non-manufacturing has maintained an activity expansion level above 50. In the Eurozone's PMI (manufacturing: 47.3, services: 55.0), the manufacturing sector has been below 50 for nine consecutive months and has been in contraction since last summer, while the services sector hit a 10-month high, The momentum of activity expansion accelerated. Japan's Bank of Japan Tankan (March survey, economic situation judgment DI, current situation, large enterprises, manufacturing: 1, same, non-manufacturing: 20), China's PMI (government announced value, manufacturing: 51.9, non-manufacturing Industry: 58.2), both manufacturing and non-manufacturing continued to expand, but manufacturing improved at a slower rate, while non-manufacturing improved significantly. The above results show that whether it is domestic demand or external demand, the global demand for goods is sluggish, while the demand for services is generally strong. In addition, the stability of manufacturing activities in Japan and China is due to the fact that compared with Europe and the United States, the lifting of restrictions on economic activities is more delayed, and the recovery of production has made a greater contribution to the manufacturing industry.
Looking back at the situation since the COVID-19 pandemic, global demand will be strong in 2020-2021, and manufacturing will drive economic recovery. However, as economic activities in various countries resume, delayed demand will gradually shift to the service industry. The current main force driving the economy has shifted from manufacturing to non-government manufacturing. At the same time, due to the rise in raw material prices and lagging logistics, the price of goods has risen sharply in the short term, but because the price of services is less sticky than the price of raw materials, and the relative influence of wages and other factors is greater, the increase in service prices is relatively small. Sharp price increases also acted as a factor dampening demand for commodities amid falling real incomes.
With the non-manufacturing industry continuing to improve, considering the decline in service demand and the stickiness of service prices, the pace of future expansion is expected to gradually slow down. The difference in economic conditions between manufacturing and non-manufacturing industries will likely gradually narrow (recoupling) rather than continue to widen or normalize (decoupling). This trend is already emerging in the United States. While non-manufacturing supports the economy, smoothly promoting the manufacturing industry as the main force of the economy will be the key to adjusting the depth and duration of the economic cycle