Last updateTue, 25 Feb 2020 5pm

Manufacturers Plan to Cut Capital Expenditures in 2020

Economic growth in the U.S. will continue in 2020, say the nation’s purchasing and supply management executives in the December 2019 Semiannual Economic Forecast. Expectations are for a continuation of the growth that began in mid-2009, as indicated in the monthly ISM Report on Business. The manufacturing sector is optimistic about growth in 2020, with revenues expected to increase in all 18 manufacturing industries. Capital expenditures are expected to decrease by 2.1% in the manufacturing sector, after 6.4-percent growth in 2019.

Small Business Optimism Rises Again in November

According to the National Federation of Independent Business, small business optimism posted the largest month-over-month gain since May 2018, rising 2.3 points to 104.7 in November. The Optimism Index reading was bolstered by seven of the 10 Index components advancing, led by a 10-point improvement in earnings. Owners reporting it is a good time to expand increased by 6 points and those expecting better business conditions increased by 3 points.

Global Manufacturing Expanded for First Time Since April

Global manufacturing showed tentative signs of recovery in November. Output and new orders saw marginal gains, while the trend in employment stabilized after job cuts in the prior six months. International trade remained a drag on the sector, however, as new export business decreased for the fifteenth successive month.

The J.P. Morgan Global Manufacturing PMI posted a seven-month high of 50.3 in November, moving back above the 50.0 line dividing expansion from contraction for the first time since April. That said, the level of the PMI is consistent with only a slight improvement in overall operating performance.

White House, Democrats Reach Deal on USMCA

House Speaker Nancy Pelosi announced Tuesday that a deal is in place for passage of the U.S.–Mexico–Canada Agreement (USMCA), a trade pact set to replace NAFTA. The House is expected to approve the USMCA officially next week. In the Senate, it is likely to come up after completing an impeachment trial in January, according to Majority Leader Mitch McConnell.

The National Association of Manufacturers had this, in part, to say in response, “Manufacturers support the USMCA, and we are encouraged that the administration and House Democrats have forged a path forward, with the support of Canada and Mexico as well. To be sure, as with any agreement of this nature, not every objective that we sought was met. For instance, we are extremely disappointed that the agreement missed an opportunity to set the gold standard for the protection of American-made lifesaving innovations and inventions. Protection of intellectual property is a key principle and critical for the long-term vitality of the manufacturing industry and the men and women who work in our sector.”

NABE Expects Economic Slowdown in 2020

The latest survey from the National Association for Business Economics (NABE) predicts economic growth—as measured by inflation-adjusted GDP—to continue. The median forecast for GDP growth in 2019 is 2.3%. Respondents anticipate GDP growth will register 1.8% in 2020, unchanged from the October survey. Real GDP increased 2.9% in 2018.

Trade policy continues to be the most widely cited dominant downside risk. Half of respondents in the December survey cites trade policy as the greatest downside risk to the U.S. economy through 2020, considering both probability of occurrence and potential impact.


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