Japanese Exports Halfway There

Bloomberg details:

Japan’s exports rose faster than economists estimated, sustaining a boost to the economic recovery that may diminish as the yen strengthens.

Shipments abroad advanced 27.7 percent in June from a year earlier, the Finance Ministry said today in Tokyo. The median estimate of 19 economists surveyed by Bloomberg was for 23.5 percent. From a month earlier, exports fell 1.8 percent.

An increase shows that the global economy continues to recover, but (as always) the increase needs to be put in perspective. Current export levels are still only about halfway back to the level seen prior to the global economic crisis.



The question is what happens going forward? Bloomberg details that following a strong rally in the yen in recent months, officials are concerned:

Japan’s currency climbed to a seven-month high against the dollar this month, prompting officials including Trade Minister Masayuki Naoshima to warn that its appreciation may hurt the recovery. The higher local currency threatens to erode the value of earnings of exporters such as Toyota Motor Corp.

“The yen has appreciated too much,” Koji Miyahara, chairman of shipping company Nippon Yusen K.K., said last week. “I’m hoping the yen will depreciate to a range of 95 to 100 to the dollar as soon as possible.”

Currency can do wonders on a relative basis, but not when every nation intends to follow the same path. And this points to what I view as a huge problem... China, broader Europe, Japan, and the U.S. (to name a few) view exports as the key for future growth and a weaker relative currency as a huge driver of those exports.

But one nations increase in net exports (by simple math) is another nations net import. So... which nation will take all of these exports? I personally don't see many takers.

Source: Customs.GO

China to the Rescue

The bull's case has been that the emerging market growth will more than make up for stagnant growth in the developed world. Data coming out of China doesn't do anything to counter that argument. Reuters details:

Chinese exports in May grew about 50 percent from a year earlier, sources said on Wednesday, a figure that blew past expectations and fuelled a rise in stock markets globally.

The key Chinese stock index .SSEC, which had been in negative territory, jumped 2.8 percent as the strong export growth reassured investors who have been worried that the European debt crisis would weigh on the global economy.

Exports, which are scheduled to be reported as part of broader trade data on Thursday, had been expected to rise 32.0 percent year-on-year in May after recording a 30.5 percent pace in April.

And that is not where China's impact on a global recovery ends. The Washington Post reports:

Nearly bankrupt and sullied in the eyes of foreign investors, Greece is moving to rebuild its economy by tapping the deep pockets of another ancient civilization: China.

Spurred on by government incentives and bargain-basement prices, the Chinese are planning to pump hundreds of millions -- perhaps billions -- of euros into Greece even as other investors run the other way. The cornerstone of those plans is the transformation of the Mediterranean port of Piraeus into the Rotterdam of the south, creating a modern gateway linking Chinese factories with consumers across Europe and North Africa.

The port project is emerging as a bellwether for Greek plans to pay down debt and reinvent its broken economy by privatizing inefficient government-owned utilities, trains and even casinos. This week, the Chinese shipping giant Cosco assumed full control of the major container dock in Piraeus, just southwest of Athens. In return, the Chinese have pledged to spend $700 million to construct a new pier and upgrade existing docks.

Source: Haver

Times They are A-Changing

The WSJ reports (hat tip Dead Cats Bouncing):

John Lonski, chief economist at Moody’s Investor Service, points out an interesting nugget within the March trade figures, released on Wednesday by the Commerce Department, in a note to clients today. March was “a watershed month,” he says, as “For the first time in recorded history, the moving 12-month sum of $227.6 billion of U.S. merchandise exports to Asia’s emerging market countries surpassed the… $223.7 billion of such exports to the European Union.”

In the year through March, he notes, U.S. merchandise exports to emerging Asia — which includes China, India, Hong Kong, Taiwan, Korea plus a handful of smaller nations — rose by 3.7% while shipments to the EU dropped by 13.9%. In other words, U.S. exports to Europe have already been dwindling while Asia has become
an increasingly important destination for U.S. goods. That should help U.S.
companies avoid too much of a hit from euro zone woes.

While my figures don't exactly match those detailed above, the story is the same. The emerging world is becoming a larger and more important partner to the United States by the day, while Europe is moving the other direction (and will continue to do so as long as the Euro continues down its current path).

In fact, one can (and plenty have) argue that the only way for the U.S. to get out of the issues currently faced is through the demand coming out of the emerging world.



Source: Haver

Japanese Exports Expand for First Time Since Crisis

Bloomberg reports:

Japan’s exports rose for the first time since Lehman Brothers Holdings Inc. collapsed 15 months ago, adding to signs that the world’s second-largest economy is recovering from the global recession.

Shipments abroad rose 12.1 percent in December from a year earlier, the Finance Ministry said today in Tokyo. The median estimate of 19 economists surveyed by Bloomberg was for a 7.6 percent gain. Exports fell 6.3 percent in November.

There were two keys for this positive year on year increase... an Asian recovery and a comparison from an extremely depressed level.

Asia

“Shipments to Asia, especially China, have been growing a lot and these are strong results,” said Yoshiki Shinke, senior economist at Dai-Ichi Life Research Institute in Tokyo. “It’s safe to say that exports were strong” in the fourth quarter.

Depressed Level

The improvement in exports last month was partly due to a favorable year-on-year comparison. In December 2008, shipments abroad tumbled 35 percent as global trade froze in the aftermath of Lehman Brothers’ collapse in September. From a month earlier, exports rose a seasonally adjusted 2.5 percent in December, today’s report showed.

Source: Customs.Go.JP

Global Demand Freefall Waning... Japanese Export Edition

The AP with the details:

Japan's exports in June fell by the smallest margin in six months, adding to evidence that global demand is recovering as the recession loosens its grip.

Shipments from the world's second-biggest economy fell 35.7 percent from a year earlier, an improvement from a 40.9 percent decline in May, the government said Thursday. Exports have fallen every month since October.

As a result of a bigger fall in imports, Japan posted a trade surplus of 508 billion yen ($5.4 billion) — the highest value since March 2008, according to the Ministry of Finance.

Export declines eased in all of Japan's major markets, particularly China. Huge stimulus spending by Beijing helped Chinese growth accelerate in the second quarter, expanding by 7.9 percent from a year earlier.

Exports to Asia and the U.S. are showing the clearest recovery, said Richard Jerram, chief economist at Macquarie Securities in Tokyo.

I've posted on this in the past, but we can see the growing importance of China to any Japanese recovery. More important, we can see the bounce not only in Chinese exports, but those to the U.S. as well.

The composition of exports to each country is widely varied and the good news is that we are seeing a stabilization of exports to both. The U.S. is a much larger market for transportation equipment (i.e. autos), whereas China is the larger market for machinery (needed for the continued industrial expansion) and manufactured goods.

It will be interesting to follow how this plays out in the coming months. We should be able to see the impact of the cash for clunkers program has on exports to the U.S. and the continuation of China's stimulus plan on exports to China.

Source: Customs.Go.JP

China Now Accounts for ~20% of All Japanese Exports

Bloomberg reports:

Japan’s exports fell in June at the slowest pace this year as demand picked up worldwide, helping the trade surplus widen for the first time in 20 months and setting the stage for an economic recovery.

Shipments abroad declined 35.7 percent from a year earlier, after dropping 40.9 percent in May, the Finance Ministry said today in Tokyo. The surplus widened to 508 billion yen ($5.4 billion).

Bloomberg continues:

Faster growth in China is propping up sales for Japanese manufacturers including Komatsu Ltd. and Nissan Motor Co. The recovery in shipments from the record collapse spurred by the financial crisis probably helped the economy grow for the first time in more than a year last quarter.

“There’s no doubt China has been a driving force for Japan’s exports,” said Masamichi Adachi, senior economist at JPMorgan Chase & Co. in Tokyo. “Manufacturers will probably continue to increase production amid the improvement in exports, and that’s good for the economic outlook.”

Indeed. Once one gets over the absurd collapse which makes me question the "setting the stage for an economic recovery", it does become clear that things would be MUCH worse if China had not shown relative strength (and now account for ~20% of all Japanese exports).

Source: Trade Stats of Japan

Chinese Exports: "Second Derivative" Turns Negative

If we're going to talk about EVERY second derivative (starting to really hate that term), here's one that doesn't bode well (though I will like to point out that the embedded margin of error makes this second derivative minuscule). But... the second derivative of Chinese exports has declined in April from March. Yves at Naked Capitalism with the details:

So much for the green shoots theory, at least as far as an early Chinese recovery is concerned. From AFP (hat tip reader Michael):

Chinese exports fell 22.6 percent in April from a year earlier in the sixth straight monthly decline, state media said Tuesday,... Exports from the world's third-largest economy totalled 91.94 billion dollars last month...

The drop was larger than that recorded in March, despite hopes that China's exports performance would start to improve.

Commerce ministry spokesman Yao Jian said in April that China was confident exports would improve "on the basis of the gradual recovery seen in the first quarter."

Exports in March fell by 17.1 percent year-on-year, narrowing from a 25.7 percent dive in February, the worst slump in more than a decade.

European Exports

Interesting analysis at Zero Hedge making the case that the Euro may have more room to go on the downside. Along with some data on the level of leverage many of these countries have built up, Tyler details the reliance Europe has exporting to the UK and US (and lack of a large exposure to China and OPEC nations), both of which are facing their own own struggles.



And the associated cliff dive...



Source: Zero Hedge

Japanese Export Recession

Bloomberg reports:

Japan’s current-account surplus narrowed in February as the global recession eroded demand for the nation’s exports.

The surplus shrank 55.6 percent to 1.117 trillion yen ($11 billion) from a year earlier, the Ministry of Finance said in Tokyo today. The median estimate of 24 economists surveyed by Bloomberg News was for a gap of 1.07 trillion yen. Japan had a 172.8 billion yen deficit in January, its first in 13 years.

The world’s second-largest economy is headed for its worst recession since 1945 as plunging overseas demand forces companies from Nissan Motor Corp. to Panasonic Corp. to cut production and fire workers. Confidence among Japan’s biggest manufacturers fell to a record low in March and executives signaled more spending and job cuts, the Bank of Japan’s Tankan survey showed last week.

Source: Customs.Go.JP

Japanese Export Dive or Just a Reversion to Mean Growth?

Bloomberg reports:

Japan’s exports plunged a record 49.4 percent in February as deepening recessions in the U.S. and Europe sapped demand for the country’s cars and electronics. Shipments to the U.S., the country’s biggest market, tumbled an unprecedented 58.4 percent from a year earlier, the Finance Ministry said today in Tokyo. Automobile exports slid 70.9 percent.

The collapse signals gross domestic product may shrink this quarter at a similar pace to the annualized 12.1 percent contraction posted in the previous three months, the sharpest since 1974. Prime Minister Taro Aso is compiling his third stimulus package as companies from Toyota Motor Corp. to Panasonic Corp. fire thousands of workers.

I chose to show it in linear scale because I don't necessarily believe trade is based on compounded growth (such as the case with GDP or equity price levels), BUT I was requested to do so, so here is...

In this case, it appears Japan has in fact reverted well through the long term pattern.

Is it possible this is just the end of the "globalization bubble"?

Source: TSOJ

U.S. Trade Deficit Down Most in 12 Years

Paul over at Infectious Greed points out the strange reaction to this morning's trade data.

Trade data today was one of those outrageous sorts of crazy thing that happen lately, and yet causes no-one to blink an eye. We had a nearly 30% drop in the U.S. trade deficit, one of the largest percentage drops of all time, and yet it really didn’t matter in some sense.

Why? Because both imports and exports tumbled too. There was a 12% (!) drop in imports -- almost $25-billion, off the top. Admittedly, that was driven by both oil prices and declining consumer demand, but it was eye-popping. And exports fell too, but not on the same scale, with them tumbling a mere 6%.

note: the U.S. has a trade deficit for goods and a trade surplus for services, thus the chart below shows a drastic reduction in net imports for goods and a slight increase in net exports for services.



Source: Census

Chinese Exports Plunge

Bloomberg reports:

Threats to the world economy are already building. Chinese central bank governor Zhou Xiaochuan said Jan. 12 that there are downside risks to the government’s 8 percent growth target for this year. Chinese exports fell for the first time in seven years in November, imports plunged and industrial output gained the least in almost a decade. Economic growth may slow to 7.5 percent this year, the World Bank estimates.

Auto Bailout Back on Track... Not

UPDATE... "pre-mature" reporting on my part (hat tip Naked Capitalism). Apparently there will be no deal:

From the Washington Post:

An eleventh-hour effort to salvage a proposed $14 billion rescue plan for the auto industry collapsed tonight as Republicans and Democrats failed to agree on the timing of deep wage cuts for union workers, killing the legislative plan and threatening America's carmakers with bankruptcy.

"We're not going to get to the finish. That's just the way it is. There too much difference between the two sides," Senate Majority Leader Harry M. Reid (D-Nev.) announced after 10 p.m., concluding a marathon negotiating session that ended in gridlock. Reid warned that markets could plummet when trading begins this morning.

According to Bloomberg:

Senate Democratic and Republican negotiators have a tentative compromise on a $14 billion automaker bailout plan that may be voted on tonight, Majority Leader Harry Reid said.


Negotiators are briefing their colleagues on the substance of the tentative accord, Reid said.


“I’m hopeful that we can finish this matter tonight,” Reid said on that chamber’s floor. “We should know soon” whether the agreement has enough support, he said.

Some positive auto news (if they make it through this period... hello TARP?)... while the autos can't depend on U.S. demand anytime in the near future, international demand (specifically from emerging markets) may be their savior. One limited data point... auto exports have held up surprisingly well (with the caveat that auto exports are still significantly smaller than imports).



Source: Census

Export / Dollar Worries Not as Bad as You Think

A lot has been discussed of late as to type of impact the global slowdown will have on both exports and the dollar. The thought is that the slowdown will decrease our exports (true) and that will decrease demand for dollars, which pay for said exports.

Of course there is another side of the story, imports. In a slowing U.S. economy, we will be importing significantly less from abroad. Items we will be importing less of are commodities (which have also priced significantly lower) and consumer goods (which are under severe pressure as the U.S. consumer delevers).

What have we seen? While service (non-manufacturing) exports are indeed falling faster than imports, the 12 month average is still positive. On the other hand, the manufacturers index actually shows the reverse (i.e. imports falling faster, likely due to the crash in commodity prices).


Given all of this and the economic problems associated with global markets, I am not a dollar bear. I definitely feel there will be weakening in the absolute value of a dollar (i.e. inflation) at some point due to the oversupply, but I expect this to happen across all currencies. Thus, the relative weakness of the dollar (which matters for exchange rates) won't be nearly as problematic. HOWEVER, I do think some / a lot of the move we've seen over the past few months was largely due to the deleveraging of global investments, and I do expect that to reverse in the coming months.

Source: ISM

Can the Credit Crisis Impact Global Hunger?

Brad Setser points out that growth in exports, which had been a source of optimism in the first half of the year, has reversed course:

The non-petrol goods deficit is now moving in the wrong direction. It increased from $29.3b in June to $35.6b in August. Non-petrol exports fell by $9.9b over the last two months, while non-petrol imports fell by “only” $3.7 billion. The sharp fall in exports shows up clearly in a chart showing “real” non-petrol goods exports and imports. Real data tries to show what is happening if changes in price are taken out of the equation — it is meant to measure the actual quantity of stuff that is traded.

Looking at year over year real exports (goods) by end-use category, we see a slowdown in September exports across the board, specifically for foods, feeds, and beverages:



As London Banker points out (via Yves at Naked Capitalism), a lot of this can be traced to letters of credit, which:

have financed trade for over 400 years. They are considered one of the more stable and secure means of finance as the cargo is secures the credit extended to import it. The letter of credit irrevocably advises an exporter and his bank that payment will be made by the importer's issuing bank if the proper documentation confirming a shipment is presented. This was seen as low risk as the issuing bank could seize and sell the cargo if its client defaulted after payment was made. Like so much else in this topsy turvy financial crisis, however, the verities of the ages have been discarded in favour of new and unpleasant realities.

How bad can it get? As we detailed above, the biggest drop has been in foods and feeds...

If cargo trade stops, the wheat doesn’t get exported. If the wheat doesn’t get exported, the mill has nothing to grind into flour. If there is no flour, the bakeries and food processors can’t produce bread and pasta and other foods. If there are no foods shipped from the bakeries and factories, there are no foods in the shops. If there are no foods in the shops, people go hungry. If people go hungry their children go hungry. When children go hungry, people riot and governments fall.

Everyone along the supply chain should worry about their children going hungry.

When that happens, everyone in governments should worry about the riots.

Source: Census

"Wal-Mart Trade Deficit"

For those that don't read Andrew Leonard's 'How the World Works', he always has interesting and insightful ideas. Yesterday's post regarding the U.S. trade deficit was no exception.

Here's a stunning number: The Census Department reported on Thursday that the U.S. trade deficit declined to its lowest level in a year, to $56.5 billion. But Calculated Risk observes that the bilateral trade deficit with China rose to an all-time high of $27.8 billion. Fully half of the U.S. trade deficit is accounted for by one country -- China.

He also noted what we have pointed to here at EconomPic Data... Walmart and other low-cost providers have faired much better (and actually thrived) as the U.S. consumer has struggled. How have they been able to keep prices so low?

In significant measure, by sourcing production of its goods in China. A rough estimate holds that fully 10 percent of the annual trade deficit between the U.S. and China is accounted for by one company -- Wal-Mart.

Unbelievable...

Chinese Hard Landing

This explains China's massive stimulus package.

Sources: BBC, China Daily via Mish

Net Exports (excluding Goods)