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The global manufacturing sector is becoming accustomed to volatile market conditions, a result of wild swings in demand and commodity prices over 2005-2011. Having overcome the global economic downturn of 2008-2009, manufacturing continues to face a number of challenges. While the global shift in production presents strong opportunities for savvy businesses, traditional consumer markets are forcing out manufacturing industries to more cost-effective locations.
Source: Euromonitor International from national statistics/UN/OECD
Note: Figures are in constant terms; fixed 2010 US$ exchange rate. 2011 figures are forecast
Source: Euromonitor International from national statistics
According to most manufacturing measures, including a number of international purchasing managers’ indices (PMI), an indicator that illustrates financial activity by purchasing managers in the acquisition of goods and services, global manufacturing contracted month-on-month during Q4 2011, with the eurozone region and the UK seeing especially strong declines. China, meanwhile, saw the first monthly contraction in its official manufacturing PMI in November 2011 for almost three years, according to national statistics, leading to speculation of the spreading impact of the eurozone debt crisis going into 2012.
Nonetheless, total global manufacturing production is expected to expand by 7.7% in real terms in 2011 annually. Most of this growth will come from Latin American and Asia Pacific, although Western Europe is expected to improve on its 2010 manufacturing output. However, with a number of Western European nations languishing well below 100.0 in the Manufacturing Production Index (1995=100) in 2010, the macroeconomic and manufacturing shift from advanced economies to emerging markets will likely continue. As a result of Arab Spring disruptions across 2011, Middle East and North Africa is projected to see greatly reduced manufacturing capacity in the short term.
Notable manufacturing strategies have been implemented in both Brazil and China. Brazil’s government launched the “Bigger Brazil” plan in August 2011, which is set to enhance the business environment for manufacturing businesses through subsidies and tax cuts. China’s 12th Five-Year Plan (2011-2015), announced in March 2011, focuses on developing sustainable, high-tech manufacturing industries while downgrading its low-quality goods production, with potentially long-reaching consequences for global exports. This may provide opportunities for other emerging nations to take over China’s mantle as a major cheap goods producer in the long run. However, a potential increase in protectionist policies in 2012, if there is a sharper than anticipated global slowdown, will also weigh on the global manufacturing industry.