High commodity prices, low spending slows world manufacturing output – report

The world’s manufacturing output grew by 5.2% in the second quarter of 2011 compared to the same period in 2010 but the growth rate is however, lower than that of the first quarter of 2011 which was 7.5%, according to a report released by the United Nations Industrial Development Organization (UNIDO).

China was the major contributor to this growth with an output increase of 14.3%.  The United States, the world’s largest manufacturing country, recorded a growth decline from 6.5% to 4.4% mainly due “to meagre growth in home building, low consumer durables and car purchases, rising input costs and poor employment generation that could not be compensated by a moderate pick-up in business investment.”

The report published September 1, 2011 notes that this growth signals that the pace of recovery may be slowing down citing less consumer spending, fiscal consolidation and high commodity prices despite the fact that output of industrialised countries rose by 2.7%.

“In industrialized countries, manufacturing output rose by a mere 2.7% in the second quarter compared to 5.7% in the first quarter mainly because consumer spending does not seem to offset the winding down of stimulus packages, fiscal consolidation and high commodity prices of the previous quarter,” the report said.

“Beginning of the year expectations for a sustained recovery from the 2008 financial crisis were dampened by a reduction in the dynamism of global private consumption and international trade during the second quarter, fuelled by further tightening of fiscal policy concerns about sovereign risks in some European countries leading to financial market instability and rising inflation,” the report noted.

Significant rise was observed in the production of general machinery and office equipment in industrialized countries but production of motor vehicles fell significantly especially due to severe decline of this industry in Japan, it indicated.

According to the report, developing countries have maintained higher growth rates of manufacturing production increasing by 11.1% with their manufacturing value added expected to grow by 8.4% in 2011.

“The world manufacturing output growth is expected to be slower this year compared to last year, despite high growth rates in developing countries,” UNIDO said.

By Ekow Quandzie