United States
Incoming economic data remain broadly stable but are showing signs of emerging weakness which increases our concerns for the outlook. U.S. factory output was up 0.7% year-on-year in February, boosted by an 8.5% surge in motor vehicle production that had seen two straight months of declines. However, U.S. manufacturing activity showed renewed weakness in March. Tariff threats have begun to weigh on factories. The manufacturing PMI fell to 49.0 (from 50.3 in February), indicating a return to contraction and input prices are rising at the fastest rate since mid-2022. U.S. consumers have also become more cautious amid economic uncertainty. Headline retail sales managed a +0.2% month-over-month uptick in February (and were 3.1% higher than a year ago), but this was largely due to necessities and online shopping. Sales at electronics and appliance stores actually fell 0.3% in February, indicating softness in consumer tech spending. Uncertainty has dented consumer sentiment, which sank to its lowest in about 2½ years in March.
Europe
But while the U.S. growth trajectory is slowing, Eurozone’s industrial downturn is showing signs of bottoming out. In March, the HCOB Eurozone manufacturing PMI climbed to 48.6, its highest reading since mid-2022 (though still below 50). Importantly, the survey’s output index crossed into expansion for the first time in two years, at 50.5, indicating that manufacturing production has finally stabilized and even inched up. Actual data support this trend: Eurozone industrial output was essentially flat in January compared to a year earlier, after contracting through much of 2024. This stabilization has been helped by improving conditions in key industries and relief from the energy crunch that plagued Europe in late 2022. Additionally, European producers saw a boost in orders as overseas customers (notably in the U.S.) rushed to buy European goods before new tariffs hit. This front-loading lifted factory backlogs in Europe in March, though it may prove temporary. Germany, Europe’s largest manufacturing base, has benefited from an upcoming “spending splurge” on infrastructure and defense that is bolstering confidence. Overall, while Eurozone manufacturing remains in a mild contraction, the pace of decline has slowed markedly and optimism is tentatively returning – the future output expectation index in March stayed high at around 60, above long-run averages. Though improving conditions could bring other pressures: unemployment in the euro area hit a record low of 6.1%, and wage growth has picked up as workers seek compensation for past inflation.
China
China’s manufacturing sector strengthened in the last month. The official manufacturing PMI edged up to 50.5 in March – the highest in a year – signaling modest expansion. Domestic demand has been a key driver: new orders hit a 12-month high, while new export orders, though still soft, improved and nearly reached the breakeven 50 level. Factories also saw a temporary lift from foreign customers front-loading orders in anticipation of U.S. tariffs. Industrial output in the first two months of 2025 rose by 5.9% year-on-year. Notably, high-tech manufacturing grew 9.1% in that period, outpacing overall industry as electronics and equipment makers increased production. Beijing’s supportive policies – such as renewed fiscal stimulus for infrastructure and manufacturing – have helped counter external pressures. Nonetheless, officials remain cautious: despite the uptick in manufacturing, China faces headwinds from a cooling property sector and the U.S. trade war. Producer price inflation has been subdued or negative (output prices actually fell in March despite rising orders), suggesting manufacturers have limited pricing power and are operating in a competitive, cost-sensitive environment.
Rising Cost of Raw Materials
The cost of raw materials crucial to electronics has been climbing recently, adding pressure on manufacturers’ margins. Copper prices have soared in the first quarter of 2025, reaching record highs. By late March, copper was trading around $5.24 per pound on futures markets – roughly 30% higher than at the start of the year. The spike is driven by a combination of robust demand and geopolitical factors. On the demand side, China’s post-pandemic economic stimulus (including infrastructure and green energy projects) is boosting purchases of copper. On the supply side, the U.S. has threatened new tariffs on metal imports, prompting buyers to stockpile copper in advance. This confluence of factors has tightened the copper market. Besides copper, other key inputs show mixed trends: aluminum has also seen price increases due to new U.S. import tariffs, and the price of gold remains high by historical standards.
Supply Chain Resilience and Strategic Shifts
In the past month, the global economic landscape has presented a mixed picture for electronics manufacturers. On one hand, manufacturing output and supply chain conditions have improved in several regions: factories in China are humming at their fastest pace in a year, and even Europe’s long-suffering producers are starting to see growth “green shoots.” Key component shortages have eased, and logistics are more reliable than a year ago. On the other hand, demand patterns and policy shifts have injected new uncertainties. The U.S. market is now weighed down by hesitant consumers and a volley of new tariffs that threaten to raise costs across the electronics supply chain. Europe’s consumers remain reticent, keeping sales growth modest. And while China’s domestic demand is a bright spot, the escalating U.S.–China trade conflict casts a shadow over the global trade environment that electronics firms depend on.
For electronics manufacturers, the most relevant factors boil down to managing risks and seizing opportunities in this environment. Supply chain resilience is more critical than ever – the past month’s developments have shown that companies with flexible sourcing and diversified production bases can better withstand shocks. Many firms are revisiting their supply chain strategies, accelerating moves to build inventory ahead of tariff deadlines or to shift production to tariff-friendly locations. Cost management is another focus: with input prices like copper on the rise, manufacturers are investing in efficiency and considering selective price increases on products, all while trying to remain competitive in a price-sensitive market. Take a look at the most recent IPC Sentiment report for more on how electronics manufacturers might respond to tariff risks. The last month has demonstrated that the era of smooth globalization may be waning, and electronics manufacturers will need to learn to thrive in a world of persistent uncertainty.
