The summer of 2011 has not been short of ominous news about possible economic storm clouds forming over the world’s largest economic areas. Europe has been dealing with its ongoing debt crisis. The United States has had its hands full with raising its debt ceiling to finance further borrowing. China has been dealing with higher than liked inflation and fear of a property bubble bursting slowdown. And Japan has been struggling to emerge from its natural disaster triggered slowdown. The latest cloud to move overhead is manufacturing. As we enter August, manufacturing is slowing or in some cases contracting around the world.



A reading above 50 indicates an expanding manufacturing sector and a reading below 50 indicates a contracting manufacturing sector.

All of the economic areas listed had lower readings in July than they did in June except for Japan.

This shows that these areas excluding Japan manufacturing even if expanding weakly in the USA and Europe or more briskly in India. Japan’s manufacturing is emerging from the massive supply chain disruptions in wake of the natural disasters in March.

Manufacturing is a very telling indicator for the overall economy. JP Morgan issues a global manufacturing figure each month as well. At the end of the first half of 2011, the global figure is a weak, but expanding 50.6. How concerned should we be? At the start of 2009 in the depths of the Global Financial Crisis, the global figure was about 35. So, I am only cautiously concerned at this point. Three major drags on manufacturing that have been causing a lot of uncertainty are subsiding. Japan is on the upswing after its horrific disasters. Europe has come to an agreement on restructuring Greek debt. And, the United States has come to an agreement to raise its debt ceiling. That said, China is still battling inflation and its overheated housing market.

The United States and Europe will continue to restructure their economies in wake of the Global Financial Crisis and be tough markets.

Asia again looks to be the safe place to invest and sell products.

China and India combined have about 30% of the world’s population, economies that are still growing quite fast, consumers who are increasing their purchasing, and are large exporters. This last point is very important. With Europe and the United States continuing to struggle it makes sense that China and India would see manufacturing contract. The key in the world’s largest markets by population is to sell more domestically.

Manufacturing can be a leading indicator for an economy’s growth or lack of. These figures show that businesses and people across the globe were ordering and buying less in July, the first month of the 2011 3rd quarter. We will not know until October if July was the beginning of negative growth in the currently barely growing economies of the United States and Europe.

China and India continue to look like the best place to expand your business or start a new one. During the Global Financial Crisis, China was able to keep its economy expanding, all be it at the slower pace (World GDP Analysis). India manufacturing is holding up better than most countries right now. These markets may be a safe haven if another global economic storm forms.


By: Matt Flax - Senior Business Advisor at DragonGate.Asia