Downsides of an export economy

[DanS]

Sucks to be Singapore...

Singapore suffers record contraction

By John Burton in Singapore

Published: April 14 2009 02:43 | Last updated: April 14 2009 18:48

Singapore’s trade-dependent economy contracted by a record 11.5 per cent in the first three months of 2009 from a year ago as non-oil exports fell 17 per cent in March, the 11th consecutive monthly decline.

The-sharper-than-expected deterioration in the economy’s performance forced the government to cut its full-year GDP forecast from minus 6 per cent to minus 9 per cent, which would make it Singapore’s worst postwar recession and Asia’s worst economic performer this year. The economy contracted 4.2 per cent in the fourth quarter of 2008.

http://www.ft.com/cms/s/0/bebdd828-2893-11de-8dbf-00144feabdc0.html

[Krill]

The downside of my export economy: no one wants the **** I offer to them

[DanS]

I'm not in the export business, but it was really slow until about mid-March.

[Saras]

M&A ain't exactly booming in LT either

[The Mad Monk]

Small indications that some inventories are being worked off. Sharp is now getting LCD panel orders from China and has partially restarted production.

One hell of an industrial pause.

We figure that our own problems were caused by our customers having too much of our product in their inventories when the slowdown hit; the orders seem to be increasing now that they've had time to burn through them.

[DanS]

Wasn't all this "just in time" manufacturing supposed to cure these large inventory adjustments?

[DanS]

According to the IMF, Germany's economy is expected to fall 5.6% this year. Japan's is only marginally worse at a fall of 6.2%. Singapore is expected to fall 10.0%.

(Btw, Lithuania and Estonia are expected to fall 10% and Latvia 12%. Holy ****, guys. This sucks.)

You have to start thinking about using the D word rather than the R word in relation to these countries.

The US is firmly in R territory, as the IMF expects a decline of only 2.8%.

[Colonâ„¢]

The issue with Japan and Germany isn't high share of export relative to GDP or a trade large surplus per se. What matters more is the composition of their output. They're heavy in capital goods and if you're producing plenty of capital goods, you're ****ed, regardless of whether much of it is exported (a country that has a disproportionally high production of, say, frozen food would feel relatively little impact, regardless of whether it's exporting much of it, of course not considering that frozen food usually isn't produced for export, but you get the point). If you were to make a volatility ranking of economic sectors, capital goods would rank amongst the most volatile, and services amongst the least (financial services being an exception). The bright side, is that these two countries ought to be amongst the first to benefit from a economic revival.

[KrazyHorse]

Thank you, Colon. That was an observation I was too lazy to type up.

I would say that it's not just capital goods, but durable goods as well. Purchases of those two categories are STRONGLY cyclical.

[KrazyHorse]

The only additional thing to note is that exports TEND to be heavily durable+capital goods.

[DanS]

I'm happy with the shorthand that I used, but concede the point.

Interestingly, the IMF expects the Canadian and Australian economies to be in relatively good shape, even though they are somewhat trade-intensive economies. Prices on commodities are much lower than they were last year, but I guess they aren't really that low right now in historical context.

[KrazyHorse]

They're actually higher than they were in inflation-adjusted terms through most of the 90s if my memory serves me (I could be wrong on this point).

Our terms of trade increased dramatically when the prices went up, and have decreased slightly since, but they're still better than they were.

Also, I believe that outside the energy sector we're actually LESS dependent on primary industries than we were previously. Certainly less dependent on manufacturing.

[KrazyHorse]

I'm happy with the shorthand that I used, but concede the point.

While it may be a reasonable shorthand, you should note that a great many people at poly are quite ignorant of basic econ. As such, Colon's post held a great deal of pedagogical value.

[DanS]

I know the price of oil has stayed much higher than I expected. My dad was prepared for $20/bbl oil -- a bust, like has happened with regularity in the past. $50/bbl (he probably gets $42 or $43 after transportation charges, etc.) is actually really good for a down period. Everybody has more oil than they know what to do with.

Perhaps folks are primed for an inflationary period after a year or two.

[KrazyHorse]

2 yrs to go. I'm pretty happy with my chances.