China has released its August trade data and picture remains ugly. Exports rose 2.7 percent in August from a year earlier while imports fell 2.6 percent, resulting in a trade surplus of $26.7 billion. The increase in overseas shipments compares with the median estimate for 2.9 percent growth from analysts and import gains of 3.5 percent and a trade surplus of $19.5 billion.
And the culprit is pretty obvious in the EU but it’s also spreading across north Asia.
No sign that the global contagion from the EU is easing but from Zarathustra comes a ray of hope:
For the export sector, however, there is a glimmer of hope that things might improve slightly in the near-term. According to Dong Tao of Credit Suisse, export orders have picked up towards the end of August for manufacturers in parts of Guangdong, although the volume of orders remains below last year’s level:
Meanwhile, in our recent trip to Dongguan, Guangdong, one of China’s export hubs, manufacturing exporters indicated that orders have picked up in the past weeks after a very bad July and early August. Exporters suggested that the pace of orders have picked up by at least 20% from a month ago, though the volume is still below what was seen the same time last year. August and September are critical times for Christmas orders. The late arrival of orders from US and emerging markets is good news for the exporters, although none of them know if the recent pick up can be sustained. A similar trend has been reported by Taiwanese electronics producers, who produce a large part of their products in Guangdong as well.
It is a little too early to call a turning point, but this is an interesting new development that has yet shown in the statistics. Typically, the pick up in orders should be materialised in the export data in November. Rush orders in late September or early October should be reflected in trading volume of late November or early December.
