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Global growth concerns tempering manufacturers' prospects

Publication Date: 18 Jul 2019 - By ReachX Team By ReachX Team
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The outlook for the global manufacturing industry remains stable but demand is expected to grow modestly across most industry sectors and markets in the coming 12 to 18 months, according to a leading rating agency.

In a report for its clients, Moody’s said segment growth will be there but is likely to follow through at a slower rate than previously anticipated.  

"Our stable outlook for the global manufacturing industry reflects earnings growth of around 2% in 2019 – considerably below the 4.0% growth forecast in December 2018 – and a higher rate in 2020 approaching the mid-3% range," said David Berge, Senior Vice President at Moody’s

"Nevertheless, with many companies continuing to pursue efficiency initiatives and input cost inflation levelling off – tariff impacts notwithstanding – margins should hold up to current levels, allowing for modest earnings growth, even as increasing risks for downward revisions remains."

Slowing global economic expansion, particularly in key industrial economies, has tempered growth prospects for the global manufacturing industry, Berge added. Meanwhile, softening consensus among purchasing managers also points to a slowdown in manufacturing activity, though inventory trends don't raise significant concerns as yet.

The agency warned that a further escalation of tariffs on internationally traded items could increase input costs and dampen industrial growth over the long-term by creating uncertainty around company investment decisions, global trade flows and supply chains. 

Among the tensions weighing on global growth in 2019 are the likely increase in restrictions on Chinese acquisitions of US and European companies and stricter limits on high-tech exports to China, alongside the high probability of a further escalation of US-China tariff restrictions.

Moody’s also said the possibility of a no-deal Brexit raises risks for manufacturers that produce a significant percentage of goods in the UK, disrupting supply chains, increasing costs and reducing competitiveness.

Disclosure:

I have no positions in any of the securities referenced in the contribution

I do not use any non-public, material information in this contribution

To the best of my knowledge, the views expressed in this contribution comply with UK law

I agree with the terms and conditions of ReachX

This contribution is for informational purpose and does not constitute investment advice nor is it an offer to sell or buy, nor is it a recommendation for any security.

ReachX Team

 

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