Downsides of an export economy

[DanS]

Updated

When your customers catch colds, you catch pneumonia.

US 4Q GDP growth: -6.2% annualized
Germany 4Q GDP growth: -8.4% annualized
Japan 4Q GDP growth: -12.7% annualized
China 4Q GDP growth: Unknown, but I'm sure the real figure is not pretty

Japan’s economy shrinks 3.3%
By Mure Dickie in Tokyo
Published: February 16 2009 01:17 | Last updated: February 16 2009 04:39

Japan’s economy contracted 3.3 per cent in the three months to December compared with the previous quarter as a slowdown in exports led to the worst performance in 35 years.

On an annualised basis, gross domestic product declined at a rate of 12.7 per cent, underlining the depth and severity of a slump that has dispelled early hopes that the world’s second largest economy might be able to shrug off the effects of the global financial crisis. The contraction was three times as bad as that of the US in the same quarter.

The big slide in Japanese GDP in the October-December quarter was its second-worst in modern times, lagging only a 3.4 percent contraction in 1974, after the first Middle East oil shock.

http://www.ft.com/cms/s/0/8cb1fbc8-fbc7-11dd-bcad-000077b07658.html

[DaShi]

And to think, they were criticizing us on our stimilus package.

[DanS]

On the merits, it is right to criticize the stimulus package. Perhaps in the runup to this crisis, these countries should have insisted on a balance of trade.

[Imran Siddiqui]

China's has got to be reeeeealy bad, I'd imagine. That trade imbalance is really screwing with them now. And of course, seeing as that's who we had buy the US's debt for all these years, it may create a really bad cycle.

[DanS]

If you believe the Chinese official stats, January exports fell 17.5% versus January a year ago. Imports were down 43%, but if you look at those imports as raw materials for the exported products of February and March, the next several months could be very dark.

Taiwan's exports declined 43% in January versus January a year ago. Japan's exports declined 35% in December versus December a year ago. South Korea's exports declined 33% in January versus January a year ago.

[trev]

So far the Australian economy has been growing, but our major exports are raw materials for the great exporters of Japan and China, so it is possible that will change quickly. On the plus side there are many major investments projects partly completed in this sector, enough money having been spent already, they cannot afford to ditch the projects, so that will keep us humming for another 6 - 12 months maybe along with gov't stimulus packages. after that who knows, but even up to end of January, our statistician was showing jobs growth in the economy, albeit very slowly, with unemployment slowing rising, but at 4.8% still very good. A recent trade surplus built on the commodities boom is now disintegrating fast though.

[Naked Gents Rut]

I thought I saw a 0% Q4 growth estimate for China somewhere.

edit:

The Chinese came out today with their 6.8% estimate of Q4 2008 growth. China publishes its quarterly GDP figure on a year over year basis, differently from the U.S. and most other countries that publish their GDP growth figure on a quarter on quarter annualized seasonally adjusted (SAAR) basis.

When growth is slowing down sharply the Chinese way to measure GDP is highly misleading as quarter on quarter growth may be negative while the year over year figure is positive and high because of the momentum of the previous quarters’ positive growth.

Indeed if one were to convert the 6.8% y-o-y figure in the more standard quarter over quarter annualized figure Chinese growth in Q4 would be close to zero if not negative.

Other data confirm that China was in a borderline recession in Q4 and that it may be in an outright recession in Q1: production of electricity plunged 7.9% in y-o-y basis; the Chinese PMI has been below 50 and close to 40 for five months now.

And with manufacturing being about 40% of GDP , manufacturing is certainly in a sharp recession (negative growth) and the overall economy may be close to a recession

So the 6.8% growth was actually a 0% growth – or possibly negative growth – in Q4; and the Q1 figures look even worse. So China is in a recession regardless of what the highly massaged official numbers claim.

http://www.rgemonitor.com/roubini-monitor/255237/the_chinese_devil_wears_prada_why_0_growth_is_the_new_size_68

[DanS]

I don't believe the zero growth either. The electricity generation number dropping 7.9% in 4Q from 4Q a year ago is what I'm looking at.

By way of comparison, Japan's electricity generation dropped 6.4% in January from January a year ago and the economy registered -12.7% annualized growth in 4Q.

[Ben Kenobi]

But Canada seems ok.

Curious.

I guess it's because of what we export!

[Imran Siddiqui]

Not so fast, Ben:

http://meganmcardle.theatlantic.com/archives/2009/02/oh_canada.php

Though Canada is in a far better position due to intelligent government policies.

[notyoueither]

Not so fast, Ben:

http://meganmcardle.theatlantic.com/archives/2009/02/oh_canada.php

Though Canada is in a far better position due to intelligent government policies.

the comments to that blog.

On topic, we aren't waiting for the bad news. It's here.

Exports

http://www.globeinvestor.com/servlet/story/GAM.20090212.RTRADECANADA12/GIStory/

From wheat to oil to steel to car parts, Canada's exporters are being hammered by the collapse of global trade.

Numbers released by Statistics Canada yesterday revealed an astonishing 9.7-per-cent plunge in Canadian exports in December, as almost every sector, from agriculture to energy to telecommunications equipment, saw a drop in the value and volume of goods leaving the country.

While imports also shrank, the export slowdown pushed Canada into a trade deficit for the first time since March of 1976.

Even shipments to the United States fell by 10 per cent, taking a bite out of the bilateral trade surplus that Canada's economy has come to depend on.

One big reason for the sharp decline in exports was the plunge in the prices of commodities - particularly oil - which pushed down the value of many of the products that did get sold outside the country. The value of exported crude petroleum, for example, fell by almost one-third in December.

"The combination of a collapse in commodity prices and a collapse in U.S. demand took a meat cleaver to exports," said Douglas Porter, deputy chief economist at BMO Nesbitt Burns, calling the trade report a "watershed" in Canadian economics.

The decline cut across almost all sectors, with the value of wheat exports falling by more than 20 per cent, industrial goods and materials seeing a 17-per-cent drop, and forest product exports declining almost 5 per cent.

Job losses in January.

http://www.statcan.gc.ca/subjects-sujets/labour-travail/lfs-epa/lfs-epa-eng.htm

January 2009

Employment fell by 129,000 in January (-0.8%), almost all in full time, pushing the unemployment rate up 0.6 percentage points to 7.2%. This drop in employment exceeds any monthly decline during the previous economic downturns of the 1980s and 1990s.

The loss in January follows other declines in recent months. Since October, employment has fallen by 213,000 (-1.2%), the result of full-time losses.

In January, the drop in employment was most pronounced in manufacturing, where the net loss totalled 101,000. There were declines in a number of other industries as well. The only industry with notable gains was health care and social assistance, where employment increased by 31,000.

Canada's three largest provinces accounted for the entire employment decrease in January. While just over half of employment losses were in Ontario (-71,000), there were also large declines in both British Columbia (-35,000) and Quebec (-26,000). Employment was little changed in all other provinces.

Employment fell mostly among core-age adults, 25 to 54 years, as well as among youths aged 15 to 24.

[BeBMan]

Thank goodness Krautland doesn't depend on exports that much. Oh waaaiiit, it does

[Dauphin]

What's the alternative for countries like Japan?

[DanS]

Increased domestic consumption. I have some ideas about what they might do to encourage consumption.

[Naked Gents Rut]

Japan needs massive amounts of infrastructure spending to remove all the infrastructure they built in the '90s.