It simply doesn’t let up. Global trade is skidding south at a breath-taking speed.
China produced a doozie:
The General Administration of Customs reported on Monday that in yuan terms, exports dropped 6.6% in January from a year ago while imports plunged 14.4%. In dollar terms, it was even worse due to the depreciation of the yuan since August: exports plunged 11.2% and imports 18.8%, far worse than economists had expected.
And so the trade surplus, powered by those plunging imports, jumped 12.2% to a record $63.3 billion.
This came on top of China’s deteriorating trade numbers last year, when exports had fallen 1.8% in yuan terms while imports had plunged 13.2%. Imports have now declined for 15 months in a row. That’s tough for the world economy.
OK, Chinese trade data can be heavily distorted by fake invoicing of “imports” from Hong Kong, a practice used to maneuver around capital controls and send money out of China. Imports from Hong Kong in January soared 108% from a year ago, even as shipments from other major trading partners declined. Bloomberg:
China has acknowledged a problem with fake invoicing in the past. In 2013, the government said export and import figures were overstated due to the phony trade to bring money into the mainland. Trade data for December suggested the practice had flared up again, this time to get money out.
In January, we have the additional fudge factor of the Lunar New Year. Chinese companies were closed all last week. It caused all kinds of front-loading in December and early January followed by a wind-down in late January and early February.
Oh, and India:
On Monday, the Ministry of Commerce and Industry in Asia’s third largest economy reported that exports of goods plunged 13.6% in January year-over-year, the 14th month in a row of declines. To blame are crummy global demand, including in the US and Europe, and as always a weaker currency somewhere, this time in China.
The economy shrank in the October through December quarter, the second quarterly decline so far this fiscal year, which started April 1. Over the past nine quarters, five booked declines; over the past 20 quarters, 10 showed declines. Most sectors got hit: consumption, housing investment, exports….
The decline in exports is particularly troubling for Abenomics. It never cared about consumers. To heck with them. It’s all about exports and Japan Inc. But two weeks ago, the Ministry of Finance reported that in December exports had dropped 8% year over year while imports had plunged 18%.
In the first half of 2015, exports still rose 7.9%; but in the second half, they declined 0.6%. Turns out, the bottom fell out during the last three months of the year: exports dropped 2.2% in October, 3.3% in November, and 8.0% in December.
In December, exports to the rest of Asia plunged 10.3%! Within that, exports to China plunged 8.6%. Asia is Japan’s largest export market by far, accounting for over 52% of total exports and dwarfing exports to the US and Canada, at 23% of total exports.
But even exports to the US fell 3.3% in December, and exports to Canada, which has been getting whacked by the commodities rout and the plunging loonie, swooned 10.4%! While exports to Western Europe rose 2.2%, exports to Russia, which is mired in a deep recession, plunged 22%.
Three years of Abenomics have brought the purposeful destruction of the yen, massive QE, negative yields on government bonds, a torrent of deficit spending, and a bevy of subsidies, tax cuts, and stimulus packages for Japan Inc. It was all balanced by a broad-based consumption-tax hike for consumers. The big rally in stocks that it created has now imploded. Abenomics is falling apart for all the world to see.
Export-powerhouse Germany too?
This scenario of crummy global demand was confirmed in a broader context by the German Bundesbank, which today released its Monthly Report for January. While exports still rose year-over-year, “at the end of the year, the German economy felt the effects of a lack of demand stimuli not only from China and commodity-producing emerging economies, but also from some industrialized countries outside the euro area.
[G]lobal economic growth in the final quarter of 2015 was unable to keep pace with its tempo of the period spanning the second and third quarters of the year. However, this recent deceleration does not reflect a broad-based economic slowdown. Rather, it was due mainly to a perceptible weakening of economic growth in the United States.
At the same time, due to the commodities rout, “the major commodity-exporting countries remained in a tight spot,” the report explained.
And some big hopes got trashed: The oil price plunge’s “stimulative effects for the global economy” had been “overestimated” and didn’t do much good, hampered also by the effects of “massive reduction in investments through the oil industry.” So “hopes for a noticeable stimulation of the global economy overall have up to now not been fulfilled.”
And US exports are spiraling down.
Booming exports of US petroleum products covered up part of the fiasco transpiring in the export of manufactured goods. But even that isn’t enough anymore. In December, total exports dropped 7% year over year to $181.5 billion, seasonally adjusted, down 8.7% from their peak in October 2014, and at the lowest level since January 2012.
Everyone wants to export their way out of trouble. Central banks in these countries want to crush their currencies to get the process going. But it’s not working anymore. Because there’s one problem: crummy global demand.
“Massive deterioration,” the CEO of container shipping company Maersk called the phenomenon. Read… “Worse than 2008”: World’s Largest Container Carrier on the Slowdown in Global Trade