Adapting an old Chinese proverb seems an appropriate place to start a round-up of the current economic situation given that much of the focus seems to be on the slowdown in the Chinese economy at the moment.

The first point to make is that while some sectors are contracting, the economy and manufacturing as a whole are still growing, just not as fast as they were and not as fast as some people had assumed would happen. That is not to say, however, that this slower growth does not cause problems for some, while at the same time as offering opportunities to others.

This slowdown has led to a fall in commodity prices as demand from China falls and, this should be good news for the rest of the world. Indeed, in developed economies generally, lower fuel prices are helping to keep inflationary pressures muted and, therefore, interest rates low. While this is good for consumption in these economies, it is not good news for the commodity producers, many of whom are seeing their economies contract as a result. For the UK economy overall this is mainly a good news story, although we have seen a significant contraction in the oil & gas sector which has affected demand for manufacturing technology.

The US economy is in good health at the moment with low unemployment, although expectations about an increase in US interest rates means that the US Dollar is strong which is having an impact on international competitiveness. On the other side of this equation is Europe, or more specifically the Euro-zone;  fears of a Greek exit from the euro have eased (although not disappeared), but the currency remains weak, giving manufacturers in the area a helping hand in competing across the Atlantic.  Again, the UK lies somewhere in the middle of this with Sterling strong against the Euro, but weak against the US$.

This brings us to the UK economy where we have unemployment at a relatively low level (although with signs that it may have stopped falling) and inflation remains virtually non-existent, at least for the moment. While it seems likely that the Bank of England will increase interest rates at some point, most commentators agree that we are at least six months away from that point and certainly not before the US makes this change in policy.

We are seeing a divergence in activity in the engineering industries;  output of the aerospace and automotive industries are at record high levels – although the automotive industry dipped in July on the back of a changed pattern of holiday and upgrading shutdowns – and, at least until the July figures came out, the metal products industry (which includes contract machining activity as well as final products such as boilers and radiators) was also showing signs of improvement after a long period in the doldrums.

The concern is over the data for the machinery industry which has been weak for some time;  in part this reflects reduced demand for products such as pumps and valves from the oil & gas sector, but this does not seem to explain the whole story, even allowing for a couple of months where there are some doubts about the accuracy of the data.

Overall then, there are a number of issues which create uncertainty in the global economy at the moment, but it is not all doom and gloom as the media headlines might suggest and there are still bright spots around, some of which give grounds for optimism for our sector as we head towards the end of the year.