Booming global growth deja-vu – is it 1995 all over again?Posted On: 02-11-2017 By: Katherine Eveland
The global manufacturing PMI has been gaining momentum. It appears we are undergoing the most robust global economy since the rebound from 2008/2009 recession. The JP Morgan manufacturing PMI reached 54.0 in September 2017. The head of the International Monetary Fund (IMF) said in early October that “the long-awaited global recovery is taking root”.
It is difficult to disagree with the IMF – in the last 12 months we have seen the global economy go through a strong period of recovery, and everyone wants to know why. It appears that there is strong coincidental growth across the world rather than a global synchronised boom. The last time we saw a similar rise across the world, before the growth of China, was in early 1995, as the global economies recovered from a series of recession in the 1991-1993 period. Perhaps the recovery has been aided by the decline in oil prices, from over US$100/bbl to a US$50-60/bbl range. It has been a big tax cut for the G7, and fixed investment has started to increase again.
There has been an effective shift in wealth from the oil producing nations to the oil consuming ones, with Europe and Japan the greatest beneficiaries. Both regions have been struggling for some time, but there are marked improvements. There has been a rapid expansion in growth in Japan in 2017. GDP growth was 4% in Q2 2017, the sixth consecutive quarter of growth and the longest unbroken streak in more than a decade. Similarly, the Eurozone is showing a strong recovery with Gross Fixed Capital Formation finally back to 2008 levels. Positive sentiment has prevailed in China too, with strong exports and, more importantly, renewed domestic infrastructure spending. Economic growth there is now less dependent on outside trade and more on internal demand.
The USA has been one of the strongest areas of growth, with the PMI hitting a 13-year high. Construction spending is already strong and with the hurricane damage in southern states more work is required, and lead times are up as bottlenecks appear. Despite the positive sentiment it remains the market with the highest degree of uncertainty. For the first time in seven years, there was an absolute loss of jobs in September 2017 and it is unclear how President Trump and the current administration will act in terms of fiscal policy in the coming months.
The buoyancy in the global economy has had a marked impact on the Wire & Cable market. There are indications that producers are seeing longer lead times and might reach capacity in some areas – again, an echo of Q2 1995. Optical fibre and fibre optic cable markets in particular are seeing strong demand growth. Leading producers are also signalling that whilst much of the optical fibre market is on allocation, recent (2016 through 2017) contradictory flat forecasts by some leading optical fibre analyst companies have not helped their planning. However, finally the key suppliers are ramping up production. Furukawa plans to double fibre production capacity at OFS, Corning is investing in new fibre operations. YOFC, in a joint venture with Shin-Etsu Chemical, is expanding its preform and optical fibre capacity. Demand for the growth in fibre optic cable is coming from 5G, big data developments, FTTx projects and wireless infrastructure construction.
Many in the industry have asked for an event where they can discuss many of these issues. As they have said – “there is so much happening, and we need a reliable view on our market”. As a result, Integer’s is holding its first Advanced Cable North America conference in Atlanta, GA in February 2018. We plan to hear from experts in this area, with speakers including AT&T, Superior Essex, Corning, OFS Fitel and Connectivity Wireless, and it will offer a number of key networking opportunities.
Written by Louisa Winnik, Senior Analyst at Integer Research.
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