The first phase of the trade deal between the U.S. and China brightened the outlooks for California and U.S. factory executives, but the dangerous virus in the Far East could pull the plug on that optimism.
The coronavirus outbreak in China has sparked some concerns it could spiral out of control abroad and cause problems that would spill over into California’s manufacturing sector and its overall economy by cutting the number of customers for American-made goods.
The national Purchasing Managers Index, released Monday by the Tempe, Ariz.-based Institute for Supply Management, increased to 50.9 last month from 47.9 in December. The index had been below 50, which suggests that the sector has been contracting, for six consecutive months.
Raymond Sfeir, a Chapman University economist, said the bounceback was a reaction to the first phase of the trade deal between the U.S. and China announced in late December. As part of the deal, China agreed to purchase an additional $100 billion in American-made products in 2002.
“That would be a big thing for California,” Sfeir said. “But I don’t think they’ll buy that much if the virus lasts for a long time. It would affect the growth rate there.”
Sfeir said the GDP growth rate in China was estimated at 6.1% for 2019 and was expected to be close to that this year. But if the coronavirus crisis worsens, it could curtail spending in China, including purchases of American goods.
Production there would also slow, which would lead to fewer imports. This would likely curtail activity at Southern California’s ports and logistics industry. “I think China’s (GDP) numbers will be lower, especially if they don’t have a handle on this,” Sfeir said of the virus.
The national PMI report calls for a 4.4-point increase in new orders and a 9.5-point jump in production. Food, beverage and tobacco products and computer and electronic products were the expected to be the strongest industries, with petroleum and coal production the weakest.
There were more than 605,000 people employed in the manufacturing sector in Orange, Los Angeles, Riverside and San Bernardino counties in December, according to state estimates.
Chapman University’s recent statewide forecast called for a 59.6 level in the first quarter, down from 61.7 in the fourth quarter of 2019. Sfeir said most of the manufacturing survey’s participants replied before the U.S.-China deal was announced.
A study by the Institute for Applied Research at CSU San Bernardino on the Inland Empire’s factory sector put the January PMI at 54.4, up slightly from December’s 52.1. The index, based on responses from about 30 Inland factory managers, has now been above the 50 baseline for four consecutive months.
Redlands-based economist John Husing said he was encouraged by January’s reports.
Federal data had indicated that American manufacturers were investing less in new equipment, with a 3% decline in the third quarter and 4% in the fourth, Husing said. That coincided with the six months the ISM’s national survey was below 50. The pace of business investment is part of the formula that determines American GDP growth.
Husing said it could take a while to determine whether the trade pact with China will give the American economy a strong boost, but a virus that spins out of control would definitely hurt Southern California manufacturers who export their products there. He said the coronavirus could have a “black swan” effect on the economy.
“That’s the event that is not anticipated that winds up screwing everything up,” Husing said.
"Factory" - Google News
February 05, 2020 at 01:56AM
https://ift.tt/2GUWPFW
Will coronavirus pull factory orders down after manufacturing rebound? - Press-Enterprise
"Factory" - Google News
https://ift.tt/2TEEPHn
Shoes Man Tutorial
Pos News Update
Meme Update
Korean Entertainment News
Japan News Update
Bagikan Berita Ini
0 Response to "Will coronavirus pull factory orders down after manufacturing rebound? - Press-Enterprise"
Post a Comment