Wednesday, October 21, 2009

What if the U.S. is Unable to Power the Global Recovery?

Reuters details:

Japan's exports edged lower for the third consecutive month in September as a rising yen weighs on overseas shipments and as a rebound driven by global stimulus spending and the stocking of inventories starts to wane.

Shipments to China continued to improve, but economists doubt this will continue as the country is trying to prevent its fiscal stimulus from forming asset bubbles in its economy.

Exports to the United States, a vital market for Japanese goods, were also slow to recover, suggesting exports will make less of a contribution to Japan's growth in coming months.

"The yen's rise is hurting corporate revenues. While the global economy is picking up, the boost to exports from strength in China may start to fade," said Takeshi Minami, chief economist at Norinchukin Research Institute in Tokyo.

"What's needed now is for consumption to recover in the United States, which is the major market for high value-added Japanese goods. In that sense, it may take time for exports to stage a full-fledged expansion."
As can be seen below, the relative strength of China has been a huge driver of the Japanese recover, but Japanese exports to the U.S. are down 34% year over year (which coincidentally matches Japanese exports to the "world ex-China / ex-U.S.", also down 34% year over year).



So when (or maybe more accurately stated will) the U.S. be able to provide the global economy with much needed private demand?

With a stretched out consumer that is busy rebuilding their personal balance sheet (or unemployed, thus busy just making ends meat), I personally doubt it. Even if they wanted and/or were willing to, is the U.S. consumer even able to with a shrinking supply of credit available to them and diminished personal assets to lever even if they do have access to a loan.

Source: Customs.Go.JP