Header credit goes to UBS’s Paul Donovan, the source of the piece of Japanese skepticism that follows. He takes us first to Sherlock Holmes’ “Silver Blaze”:
Gregory: “Is there any other point to which you would wish to draw my attention?”
Holmes: “To the curious incident of the dog in the night-time.”
Gregory: “The dog did nothing in the night-time.”
Holmes: “That was the curious incident.”
A strong opening gambit, as yen tales go. Read more
The weaker yen hasn’t done much for Japan’s exports so far, with preliminary data out today showing another record in Japan’s trade deficit. Exports were 6.4 per cent higher, year-on-year, in January and failed to raise as much as imports (up 7.3 per cent). This brought the trade deficit to Y1.63bn.
Societe Generale say not to worry yet, however. Firstly, those figures are not seasonally-adjusted. Month-on-month seasonally-adjusted numbers show the trade deficit shrank from Y678.9bn in January from a revised Y783.8bn in December. Read more
China’s official manufacturing PMI figure was reported at 49.8 for September, an increase from 49.2 in August. Meanwhile, on Saturday the HSBC/Markit Economics PMI was 47.9, confirming the 11th month of contraction — the longest in the survey’s history.
Some China economists have welcomed the official PMI coming within a whisker of 50, but we don’t see a lot to be excited about — it seems indicate little, apart from support for a “new normal” in Chinese growth. The components of the main figure all improved, including the important “new orders” and “new export orders” numbers. However, employment fell slightly to 48.9 from 49.1. Read more
Do not be misled by the “big jump in surplus” headlines: as most reports on the subject will quickly point out, China’s trade figures for June are another signal of slowing growth.
Export growth fell as expected, but import growth fell much more than expected (hence the big surplus). Many imports are destined to become exports, so a slowdown in imports points to falling demand for Chinese goods too. And the categories of imports bear this out, says Nomura’s Zhiwei Zhang points out: Read more
Or: an important anti-anti-globalisation argument. The crux of that argument being that there has been a “food crisis”, or two, over the past decade and a significant portion of price hikes can be laid at the door of protectionist policies, which are subject to a damaging multiplier effect.
Essentially, if you see a food shock driving up prices in world markets and increase your own export restrictions to keep food at home, you are feeding into a multiplier process which will end up hurting everyone. Read more
President Obama’s announcement, in January 2010, of his aim to double US exports in five years had the “benefit” of timing, coming so soon after the historic collapse of worldwide trade had just begun to recover.
And as it did, US exports naturally climbed along with it, impressively so. Read more
China’s exports fell and imports slid more than forecast in January, reports Bloomberg, the first declines in two years, as a weeklong holiday disrupted trade and commodity prices dropped. Overseas shipments decreased 0.5 per cent from a year earlier, according to the customs bureau said. Imports fell 15.3 per cent, compared with a median economist estimate compiled by Bloomberg for a 3.6 per cent fall. That left a greater-than-forecast trade surplus of $27.3bn, a six-month high, the data showed. Adjusted for the four fewer working days than last January, exports rose 10.3 per cent while imports were up 1.5 per cent, the customs burea said. Commerce Minister Chen Deming said on Thursday that January exports “cannot make us optimistic”.
On Monday, S&P warned that the downgrades of sovereigns in Europe may well impact credit ratings in the Asia-Pacific region, the WSJ reports. While governments in the region may have recourse to strong balance sheets, the “dislocation in global funding markets” means that any fallout would be more challenging to deal with than it was in 2008. However, S&P is also of the view that China will manage to avoid a hard landing. Asian economies on the whole have bit hit by waning demand from the European countries that they export to. The IMF has also lowered its global growth forecast for 2012, highlighting that no country is isolated from the crisis in Europe.
Is QE money printing, or not? That is the question.
Is it hyperinfaltionary, or not? That is another question. Read more
Chinese exports slowed in October, reports the FT, pressured by the mounting woes in Europe, but strong imports served up a reminder of the domestic economy’s strength. Exports rose 15.9 per cent year-on-year, down from 17.1 per cent a month earlier. Imports increased 28.7 per cent, accelerating from a 20.7 per cent pace. Chinese exports to the European Union were up 7.5 per cent year-on-year in October, down from 9.8 per cent in September. Exports to the US fared better, rising 13.9 per cent in October, up from 11.6 per cent in September. China’s trade surplus still widened to $17bn from $14.5bn a month earlier, though that was well below market expectations for a figure closer to $25bn. The trade surplus is on track to fall about 10 per cent this year, welcome news from a diplomatic perspective for Beijing, which has been trying to persuade foreign critics that its growth model is better balanced and less reliant on exports than in the past.
China Flash PMIs out on Monday showed a seasonally-adjusted figure of 51.1 — the highest in five months and a big turnround from September’s 49.9. The preliminary PMIs are compiled by HSBC and Markit Economics, who both say it points to a soft landing. The positive figure for export demand is particularly encouraging for a soft landing scenario:
There’s been plenty of comment, and prodding, about how European politicians need to man (and woman) up, bite the bullet, and start acting with conviction. After all, with every passing day, the price tag rises as the level of distress increases and lack of growth butts up against austerity measures.
Take, for example, the slow hollowing out of Greek banks, which suffer not only for their holdings of their government’s debt, but also from the flight of depositors. Every wonder exactly how much deposit flight there has already been? Credit Suisse has your back on that one, chart below: Read more
HSBC/Markit Economics’ Flash China PMIs came in at 49.4 for August — suggesting it will be the third month in a row of contractionary indicators.
It’s lower than the July’s 49.9, but slightly higher than the June final figure of 49.3. Read more
Japan’s exports rose in the year to August at less than half the pace expected as a global economic slowdown, a strong currency and Europe’s sovereign debt crisis put the country’s own recovery increasingly in doubt, Reuters says. Exports rose 2.8 per cent in August from a year earlier, much less than a median forecast for an 8 per cent annual increase. Shipments to China rose an annual 2.4 per cent while those to the US rose 3.5 per cent. Weak exports are also an ominous sign as the US Federal Reserve could inch toward easing policy, which could potentially push the yen even higher versus the dollar and worsen trade conditions for Japanese exporters. Analysts surveyed by Bloomberg News see gross domestic product expanding at an annualised rate of 5.7 per cent this quarter, after three consecutive quarters of economic contraction.
Chinese premier Wen Jaibao threw some shade on the eurozone on Wednesday, and the US too — insisting they get their own fiscal and monetary houses in order and recognise China as a market economy if they really want to see some investment.
His own house didn’t look so great, either, when the Asian Development Bank challenged the likelihood of a much hoped-for Chinese soft landing with its updated outlook. It raised the inflation forecast for China, while cutting growth forecasts (hmm… stagflation, anyone?). Read more
The news on Tuesday that the US trade gap in May widened to its largest point in more than two years won’t alleviate concerns about an expected disappointment in Q2 GDP, but the news isn’t quite as bad as the headline number would suggest.
Here’s a graph from Calculated Risk: Read more
Japan’s trade balance fell for the first time in three months in April as supply chain problems from the March earthquake and tsunami sharply curtailed exports. Japan swung into a trade deficit of Y463.7bn ($5.7bn) as exports fell 12.5 per cent from a year earlier, and imports rose 8.9 per cent on higher demand for fuel, the FT reports. The deficit was significantly smaller than the median estimate of 24 economists surveyed by Bloomberg, which was for a shortfall of Y704bn. Despite the lower figure than forecast, the deficit highlights the impact of the March earthquake and tsunami, which knocked out a wide range of production sites and affected some of Japan’s biggest exporters, including Toyota, Sony and Hitachi.
The US has become a net exporter of fuel for the first time for nearly 20 years as drivers struggle with high petrol prices, according to the FT. Energy department data show the world’s largest oil consumer in February shipped out 54,000 barrels more petroleum products each day than it purchased on the global market. After a five-year decline in net imports, the US became a net exporter in late 2010, a trend analysts say is confirmed by the latest data. Allgov.com says rather than match demand for gasoline, oil companies are producing less for the US market and exporting more to other countries, while taking increased profits. Higher gas prices are the product of the nation’s refineries operating at about 81 per cent of their production capacity, Allgov.com adds, citing the Department of Energy.
China on Sunday announced an unexpected surge in March exports, signalling strong global demand despite the Japanese earthquake and high global oil prices, the FT reports. On a quarterly basis, China recorded its first trade deficit since 2004 in the first quarter, the General Administration of Customs said. The first quarter trade deficit of $1.02bn reflected domestic economic strength and rising commodity prices, analysts said. But Zheng Yuesheng, statistics chief with the customs administration, told state television that the first-quarter deficit was likely to be only “temporary”. And a late surge in exports – which rose 35.8 per cent year on year in March – boosted the trade balance narrowly into positive territory for March, with a $140m surplus.
Around half of America’s climb out of recession since 2009 has come from exports — but now the markets for those exports are becoming shaky, the WSJ reports. JPMorgan analysts lowered their US growth forecasts to 3.4 per cent from 4 per cent on Friday, following shocks to the Japanese economy and oil prices. Executives at companies such as Adobe have already noted a hit from Japan’s earthquake by lowering revenue forecasts for the latest quarter. Elsewhere in the supply chain, trade-focused companies are postponing orders. Overshadowing the most recent shocks is the recession’s huge impact on world trade. FT Alphaville notes a new Fed paper which estimates that global trade volumes fell by 19 per cent during the crisis.
US and Chinese officials touted a $45bn package of export deals on Wednesday to coincide with the state visit of Hu Jintao, the Chinese president, but the largest contract was in fact a reiteration of a previously announced order, notes the FT. US companies have been critical of China in the past 12 months, pressing the administration of Barack Obama to toughen defence of their intellectual property rights and their ability to access lucrative Chinese government procurement contracts. To smooth the waters, the Chinese president met the chief executives of high- profile US companies on Wednesday such as Jeff Immelt of General Electric, Steve Ballmer of Microsoft and Lloyd Blankfein of Goldman Sachs. The export package includes a $19bn order for Boeing aircraft, 70 extra contracts involving 12 US states worth $25bn and a series of investment deals. Combined, the deals will support about 235,000 US jobs, the White House said.
US companies have won a series of high-profile deals in Saudi Arabia during the past six months, underlining the confident return of US business to the kingdom, the FT reports. The revival of trading ties that degraded markedly in the wake of the September 11 attacks of 2001 is being strongly supported by the US administration, with Saudi Arabia and other Gulf states seen as a key element of President Barack Obama’s initiative to double US exports in five years. Francisco J. Sanchez, undersecretary of commerce for international trade, this month visited the kingdom for the second time in less than six months, heading a delegation of 16 companies looking to participate in the $400bn five-year plan by the kingdom to develop infrastructure and expand oil production. “I have chosen to lead two missions here to underscore the importance of American companies reaching out, strengthening our ties, and offering to be partners in the development, particularly the infrastructure development,” Mr Sanchez told the Financial Times.
The big story on the trade balance figures released this morning is that US exports climbed to a two-year high in October on the back of a $4.9bn monthly boost over September. Imports declined by $0.9bn.
Trade in services was mostly unchanged, but nearly every category of goods showed improvement. The trade balance figures tend to jump around a bit, so it’s dangerous to extrapolate anything from just one month’s reading, but the balance appears to have broken away from its downward trend: Read more
China recorded another large trade surplus in November of $22.9bn as both exports and imports grew strongly, putting more pressure on the Chinese authorities to raise interest rates and let its currency appreciate, reports the FT. Exports grew 34.9 % in November over the same month the year before, much faster than forecast, and potentially a sign that demand from developed economies is picking up. In October, exports rose 22.9%. Imports to China were also well ahead of forecasts, increasing by 37.7% over the year before, compared to an increase of 25.3% in October. The trade surplus was down from the $27.15bn registered in October, but ahead of forecasts and still one of the biggest ever recorded.
Yes, we really are talking about the UK.
UK PMI new orders jumped to 59.1, marginally above Germany! Export orders were up 1.6 points to 56.9. Read more
Spain is out…
… and it’s not great news. New orders down 1.5 points to 49.6 and employment down too. Read more
US farmers will export a record $126.5bn worth of crops in the year to October 2011, the US government said. It is the clearest indication of how rural America is profiting from rising agricultural commodities prices and surging food demand in Asia, the FT reports. The revised forecast, published on Tuesday, beats the previous record of $115bn set two years ago during the 2007-08 food crisis and represents a 16.6 per cent increase from last year. The jump bodes well for the US agribusiness sector, from tractor manufacturer Deere Co to traders Cargill, Archer Daniel Midlands and Bunge. The US is the world’s top exporter of food commodities, accounting for half the world’s corn, a third of the world’s soyabeans and a up to a fifth of the world’s wheat. The FT also reports that US regulators will have more power to scrutinise the safety of food imported into the US – from Chinese seafood to cheeses made in France – following the expected passage of legislation in the Congress.
Ukraine, one of the world’s largest grain producers, is set to impose quotas on its exports in order to protect national food supply after poor weather damaged crops, government officials said on Tuesday, according to the FT. The move comes after Russia banned grain exports two weeks ago, causing prices of staples such as wheat and barley to spike and raising fears of a repeat of the 2007-08 food crisis when countries from India to Argentina imposed trade restrictions.
Germany’s manufacturers look set to sweeten the last weekend of Chancellor Angela Merkel’s summer break as evidence mounts that the country’s export-oriented economy is growing much faster than others in the eurozone, reports the FT. Gross domestic product figures for the second quarter, released on Friday for many of the 16 countries in the bloc, are expected to show a two-speed recovery, with Germany having grown by as much as 1.3 per cent in April, May and June, France by perhaps 0.4 per cent and Spain by as little as half that rate. As a result, economists expect Germany – whose reliance on exports has been criticised by foreign partners in past months, particularly France – to boost growth across the entire eurozone from 0.2 per cent in the first quarter to about 0.7 per cent in the second.
German imports surged to their highest level in June and were expected to grow further, lifting European stocks on Monday on hopes of a solid economic recovery, the FT reports. The trade figures also contained a hint that Germany’s export-reliant economy, which has come under sharp criticism, is becoming more balanced. Meanwhile, the Wall Street Journal reports that the German Industry and Trade Association expects exports to return to pre-crisis levels in 2011, growing 11 per cent in 2010 and 8 per cent the year after.