The International Monetary Fund (IMF) just raised its regional GDP growth forecasts for 2020 and 2021 (Charts 1 & 2). For the world it predicts a 4.4% global GDP decline this year followed by a 5.2% expansion next year. This economic turnaround won’t be easy and hinges on being guided by good science, political leadership and popular acceptance.
See a detailed discussion of the October IMF forecast.
Global Manufacturing Growth
Although the service sector (including travel) is still struggling, manufacturing is again growing. The September 2020 global manufacturing PMI rose to 52.3, down 2% versus September 2019 and up 9% sequentially versus August 2019 (Chart 3). Almost all major countries saw a September PMI increase (Chart 4).
Seasonal Electronic Upturn
Composite regional electronic equipment sales reveal an obvious autumn upturn (Chart 5). Although the first half of 2020 was bad, the third quarter shows a real (effectively seasonally adjusted) upturn in this third quarter (Chart 6).
This present world manufacturing growth cycle is largely seasonal (Chart 7) with its normal, consumer spending-driven expansion likely to ebb at year end, only to resume again early next summer.
The global semiconductor chip and equipment business cycles are outperforming the economic cycle. World semiconductor shipments are up and their leading indicator, Taiwan foundry sales, at a record high. World SEMI equipment shipments are leading semiconductor sales on a 3/12 growth basis (Chart 8) and the global PMI predicts at least near-term further semiconductor industry growth (Chart 9).
The next months will still reflect economic, pandemic and political chaos, but hopefully the IMF forecast above will indeed materialize.
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Walt Custer of Custer Consulting Group is an analyst focused on the global electronics industry. He can be reached at email@example.com.