Manufacturing announcements report on how much manufacturing activity is taking place within an economy. Manufacturing is one of the most significant drivers of economic growth and job creation in most economies, so seeing increasing levels of manufacturing activity is always a good sign. Conversely, seeing decreasing levels of manufacturing activity is typically a negative sign for an economy.
Manufacturing data are released in multiple announcements that you need to be aware of:
- Factory orders: Measurement of factory demand and activity
- Industrial production and capacity utilization: Measurement of the goods produced in an economy and the spare production capacity of its manufacturers
Impact on Trade Flows
Increasing Manufacturing –> More Jobs –>Increased Consumer Spending –> Increased Demand for Imports —> Increase in Trade Flows
Increasing Manufacturing –> Increased Demand for Raw Goods and Materials–> Increased Demand for Imports –> Increase in Trade Flows
Decreasing Manufacturing –> Fewer Jobs –> Decreased Consumer Spending –> Decreased Demand for Imports –> Decrease in Trade Flows
Decreasing Manufacturing–>Decreased Demand for Raw Goods and Materials —>Decreased Demand for Imports —>Decrease in Trade Flows
Impact on Investment Flows
Increasing Manufacturing —> More Jobs —> Increased Consumer Spending—> Increase in Corporate Profits—>Rising, More Attractive Stock Market —> Increase in Investment Flows
Increasing Manufacturing—> More Jobs —> Increased Consumer Spending—> Rising Inflation —> Central Bank Raising Interest Rates—> More Attractive Government Debt Market —> Increase in Investment Flows
Decreasing Manufacturing—> Fewer Jobs -> Decreased Consumer Spending -> Decline in Corporate Profits -> Falling, Less Attractive Stock Market -> Decrease in Investment Flows
Decreasing Manufacturing —> Fewer Jobs —> Decreased Consumer Spending –> Falling Inflation -> Central Bank Lowering Interest Rates—> Less Attractive Government Debt Market —> Decrease in Investment Flows
Impact on Money Supply
Increasing Manufacturing—> More Jobs —> Increased Consumer Spending —> Rising Inflation –> Central Bank Raising Interest Rates —> Decrease in the Money Supply
Decreasing Manufacturing—> Fewer Jobs —> Decreased Consumer Spending –> Falling Inflation —> Central Bank Lowering Interest Rates —> Increase in the Money Supply
Impact on Investor Fear
Increasing Manufacturing —> Confident Investors
Decreasing Manufacturing —> Nervous Investors
Typical Impact on the Currency
Increasing Manufacturing—> Stronger Currency
Decreasing Manufacturing —> Weaker Currency
