Chart of the Month: China spurred global manufacturing in 2016 as so many others faltered


According to CPB data, world manufacturing growth in 2016 was just 2%.

This month’s Chart of the Month brief assesses which manufacturing markets grew most rapidly in the year, and then looks at how they’ve fared since the pre-recession peak year of 2008.

As explained in a similar brief written about a year ago and in more detail in Global Contract Logistics 2017, for the purposes of the logistics sector, it is important to clarify how ‘high-level’ growth figures can offer useful insights. It is easy to comprehend that as the manufacturing sector grows, demand for transport and logistics services grows. But by how much?

First, consider what the ‘manufacturing logistics’ market is. It is simply the sum of the logistics costs of all manufacturers. That is some proportion of total manufacturing sector revenues. Now consider a scenario whereby that proportion does not change year-on-year. Manufacturing sector growth will then equal manufacturing logistics costs growth. In reality, that proportion does change year on-year, so it is more worthwhile to think about where that change is likely to be small, such that the headline manufacturing growth numbers tell us something meaningful about growth in manufacturing logistics. Intuitively, it seems likely that there would be far more ‘action’ in emerging markets rather than more mature, developed markets, where one might expect logistics costs as a proportion of sales to be more consistent over time, although of course that should be taken as a generalisation at a very high level.

With that in mind, a look at manufacturing production* growth rates across various countries in 2016 reveals Central and Eastern European markets were top of the class in 2016, as was the case in 2015. Slovakia (1st, 5.2%), Poland (2nd, 4.1%) and Czech Republic (5th, 3.7%) all made the top five. Hungary was 8th but growth was just 1.4%. Indonesia and Greece both had growth of 4%. Among the big five Western European economies, Spain, was clearly the best performing with growth of 2.7%. Germany and Italy had growth of just over 1%, while the UK and France only managed growth around 0.5%. The other major markets of the US and Japan both registered basically no growth at all.

The near-sourcing markets of Mexico and Turkey only managed growth of 1.4% and 1.3% respectively. Other emerging markets also fared poorly: Russia, Chile and even India all had slightly negative growth, while Brazil was bottom of the pile, having contracted by 6.1%. However, if you believe the data of China’s National Bureau of Statistics, the saviour of world manufacturing is China, where manufacturing production growth was 6.8% in 2016, better than any other country on the chart below.

Manufacturing Production Growth 2016 Selected Markets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Source: OECD

The graph below measures how much larger certain markets were at the end of 2016 compared to 2008 (the pre-recession peak year for most markets), offering up a markedly different picture to the graph above. Although Poland and Slovakia are still at the top of the league, Hungary and Czech Republic are middle of the pack. While Russia has endured a number of struggles over the period, its manufacturing sector was still larger at the end of 2016 than it was in 2008. Southern Europe has suffered badly: Italy and Spain’s manufacturing sectors are still almost 20% smaller at the end of 2016 than they were in 2008. That Brazil’s position is worse than France’s illustrates the scale of the hole it is in. Chinese data is not available.

Manufacturing Production Growth 2008-2016 Selected Markets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Source: OECD

In summary, China was the backbone for manufacturing growth in 2016, as so many others around it struggled. Among those were many emerging markets, though it must be said that since the recession, they have generally delivered robust enough growth. Conversely, the rule of thumb for advanced economies is that they are almost back to where they were before the recession or considerably worse.

Unlike retail logistics which has to some extent been bailed out by e-commerce, the operating environment for manufacturing logistics in advanced economies appears to have offered no easy route for growth. There does not appear to be one on the horizon either.

Source: Transport Intelligence, April 4, 2017

Author: David Buckby

*Manufacturing production growth measures real terms growth of manufacturing sector value-added. Over simplistically, value-added measures the grand total of all revenues from final sales and (net) subsidies. Real growth means that growth has been estimated excluding the impact of price changes, such that growth is only due to changes in volumes only (hence the term manufacturing production).

For further insight into the contract logistics market, including analysis of its market size and forecasts broken down by regions and countries, strategies of the major 3PLs, analysis of technologies in the industry, and the major trends affecting the market, fill in the form below and register your interest in Global Contract Logistics 2017.

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