Small-Business Economic Outlook ImprovingChina Industrial Production ReboundsOECD Forecasts Growth in U.S. and Europe, Declines in ChinaJobless Claims Up, but Still at Historic Lows
A global manufacturing recovery will boost worldwide sales of industrial automation equipment (IAE) by 6.2 percent this year to approximately $170 billion, according to a report from IMS Research. The increase is a sharp contrast to 2012, where the interdependence of global markets kept sales low.
"The interdependence of the world's industrial markets came to the fore during 2012 and made its presence felt as weak demand in some regions hit the exports of others, causing revenue from industrial automation equipment (IAE) to grow only 3.7 percent," noted Jenalea Howell, research manager for the Industrial Automation service at IHS, the parent company of IMS Research.
In addition, overcapacity in several industrial markets, following two years of strong growth in China, led shipments to fall by more than 2 percent last year.
This year has seen major improvements in leading indicators, such as machinery orders and manufacturing activity. The report predicts demand for industrial products to increase during the next six months, spurred by manufacturing growth in China, Europe, and the U.S. in the first half of 2013.
Last year's recession, the report adds, has made investors in IAE more aware of market risks, thus causing them to spend more strategically. In response, manufacturers are adjusting price structures and market strategies, with many venturing into areas beyond their traditional spheres of activity in the quest to grow.
For example, some Western suppliers are releasing product in the midtier range to serve cost-sensitive markets, while Chinese manufacturers are developing products with higher functionality to compete more effectively in areas traditionally served by Western players.
Small-Business Economic Outlook Improving, but Still a Concern
A new report released by the National Small Business Association (NSBA) indicates that the small business owners are more confident in the overall economy, with 40 percent indicating that the economy is better off that it was five years ago.
The 2013 Mid-Year Economic Report, which reflects more than 1,100 small-business owners from various industries, also shows that despite the improvement in economic outlook, small businesses still indicate economic uncertainty is the biggest challenge that they face. There was little change in small-business revenue and profits over the past year, with stagnant growth in revenue and profits projected for the next 12 months. Other major challenges cited by owners include a decline in consumer spending and the high cost of health insurance.
One major decline in business was in financing -- 65 percent of small businesses owners said they were able to obtain adequate financing, a drop from 73 percent six months ago. One positive note was that owners who anticipate decreasing their workforce fell from 16 percent six months ago to 14 percent.
Two key areas of concern are the health care reform and taxation, according to owners when asked to rank the top items that they would like to see Congress and the Obama administration address.
"A unique and very disappointing finding from our survey: the number one issue small business wants our elected officials to address isn't even a policy imperative, it's for them to end the partisan gridlock and work together," according to NSBA Chair David Ickert of Air Tractor Inc. "There are too many important issues facing our nation for this continued failure from policymakers."
China Industrial Production Rebounds
The government of China's Purchasing Managers' Index (PMI) for July rose to 50.3 against market analyst expectations of contraction.
The June PMI of 50.1 was expected to drop to 49.9 in July according to a Reuters poll and other economist surveys. Ratings above 50 signal expansion, while ratings below 50 signal contraction. HSBC's PMI for China echoed this sentiment, falling to an 11-month low of 47.7 from 48.2 in June. Both numbers represent a contraction.
However, the official number was matched by additional trade figures released last week that showed good news for China's economy. July trade figures bested economists' predictions, leading analysts to believe the economy is stabilizing after a two-quarter stagnancy.
Imports rose 10.9 percent, 8.8 percent higher than the 2.1 percent predicted rise. Exports rose 5.1 percent, 2.1 percent higher than the predicted 3 percent growth. Both figures had dropped in June, with imports falling 0.7 percent and exports 3.1 percent.
The total trade surplus for China settled at $17.8 billion, much lower than the $27.2 billion surplus projected by CNBC, among other outlets.
"China trade data for July indicates a rebound of external demand and a resurgence of domestic demand," Dariusz Kowalczyk, senior economist and strategist of Asia ex-Japan at Credit Agricole, told CNBC. "All this confirms our view that the economy has bottomed out and will re-accelerate in the second half. We'd like to call the end to worries over China for this year," he added.
Despite the sudden turnaround, the Organization for Economic Cooperation and Development (OECD) predicted a dimmer future for China's economy (see below).
OECD Forecasts Growth in U.S. and Europe, Declines in China
Economic growth in the U.S., Japan, and Europe is set to pick up through the end of the year, while Brazil, Russia, India, and China -- popularly known as the BRIC countries -- will slow, according to the Organization for Economic Cooperation and Development's (OECD) composite leading indicators (CLI).
The Paris-based think tank announced Thursday that its CLI of economic activity in its 34 developed-country members rose to 100.7 in June from 100.6 in May. A reading of 100 represents a growth trend, which varies from country to country.
OECD's CLI for the U.S. rose to 101.2 from 101.0, while the eurozone rose to 100.4 from 100.2. Italy also saw expansion to 100.7 from 100.4, while the U.K. rose to 100.8 from 100.7. The leading indicator for Japan rose to 101.2 from 101.1.
The OECD said China's CLI fell to 99.4 from 99.6, while its leading indicator for Russia slipped to 99.0 from 99.1 and its indicator for Brazil fell to 98.8 from 99.1.
The OECD's leading indicators provide an early signal of turning points between the expansion and slowdown of economic activity. They are based on a wide variety of data series that have a history of signaling changes in economic activity.
If the data is correct, it means that Europe could be finally headed out of the longest recession since World War II. It also means the recent rise in China's Purchasing Managers' Index is an anomaly in an otherwise steady slowdown that most economists predict will cause the nation to miss its growth target of 7.5 percent for the year.
Jobless Claims Up, but Still at Historic Lows
The number of Americans filing for unemployment benefits rose by 5,000. But the data shows total claims remain at a six-year low.
Weekly applications for unemployment increased to 333,000. The four-week moving average, which smoothes out volatility, fell by 6,250 to 335,000, the lowest since November 2007. Jobless claims have hovered mostly below 350,000 per week since the start of the year.
Unfortunately, the U.S. Labor Department announced last week that employers added a disappointing 162,000 jobs last month, the smallest gain since March. That means, despite the unemployment rate falling to 7.4 percent last week, the trend toward decreasing claims could be a result of workers leaving the job market, rather than job seekers finding new positions.