Strong export figures from China prove that the global economy is out of the emergency room and has been moved into the recovery room
Strong export figures from China prove that the global economy is out of the emergency room and has been moved into the recovery room. Not only have consumers in Asia been buying more goods from China, but also consumers in US and EU are beginning to breathe healthier. The global economy as a whole may still need some growth stimulus, and wise policy initiatives to make sure recovery is sustained.
Chinese import and export figures published Monday by Chinese customs show that gross foreign trade value attained USD 254.8 billion in June 2010, which is a new record monthly high. June also marked a new export record of USD 137.4 billion, emphasizing China’s position as the world’s largest exporter. But the strong export in recent months may be inflated by the forthcoming reduction in export tax rebates that may erode the competitiveness of some Chinese goods in a combination with a stronger Chinese currency.
: BIMCO, General Admin. of customs of the PR China
The latest overall PMI indices from China suggested a cooling of the manufacturing sector is ongoing, but the sector as such is still expanding. However, if you look at one of the sub-indices of the PMI, the “new export orders”, the indicator from Markit fell below 50. Meanwhile, the same sub-indicator from the official source declined to 51.7 from 53.8 in May. One quarter of the industries surveyed recorded contraction of new export orders, while three quarters of the industries surveyed recorded expansion, of which two industries reported readings above 60: metal products and oil refining & coking.
Shipping analyst at BIMCO, Peter Sand says: “China may not post a new export record in July, but the foreign trade data looks strong from a shipping point of view. Right now container ships are departing from China fully loaded with cargo left on the quay, due to lack of containers.”
Iron ore imports stayed relatively strong in June with 47.2 million tonnes being landed in China, down 9.1% from May. But during first half of 2010, imports are still 4.1% higher y-o-y according to Chinese customs. Given that the metal product export industry is reporting an expansion of new export orders, a complete evaporation of Chinese demand is not likely to take place. Despite that, some have linked the continued drop of the Baltic Dry Index that’s currently going on for 35 consecutive days with an ongoing slowdown in China.
“That is definitely a part of the explanation but over-supply of tonnage remains to be the focal reason for falling freight rates. According to the latest BIMCO supply growth forecast the dry bulk fleet could grow as much at 15% in 2010, with Capesize seeing the largest growth”, adds Peter Sand.
In the US: state of the market composite indicators ISM Service and ISM Industry revealed identical tendencies towards continued growth at a slower pace than the previous month. It is worthwhile to notice that the sub-index for new service orders declined for the fourth month in a row, to 54.4 down from 57.1 in May. This reading is the lowest this year. Meanwhile in Europe, the European Central Bank decided to leave the interest rate unchanged at 1% as the bank expects the euro-zone to grow moderately and at uneven rate in an environment still characterised by great uncertainty.
Just this morning China revealed that its GDP grew by 10.3% y-o-y in the second quarter of 2010, down from 11.9% in Q1. Chinese industrial production also took a breather, as growth for the second quarter came in at 13.7% y-o-y. The slowdown was expected, as indicated by the monthly manufacturing PMI data previously released. Inflation also declined to 2.9% y-o-y in Q2.
Read more about this here: “China is still growing but at a slower pace”. https://www.bimco.org/Members/Reports/Shipping_Market_Analysis/2010/07/05_CHINA.aspx