I know this is getting boring but I can’t let the following pass without comment:
The Australian and global economies got some good news over the weekend with Chinese trade data revealing a rebound in trade volumes. At the same time, officials at the People’s Bank of China said that China had a further fiscal stimulus plan ready to implement which should ensure economic growth picks up in 2013. The PBoC did, however, also suggest that the current level of the yuan, the Chinese currency, is about right, which means that any further appreciation in the yuan is unlikely in the near term.
In terms of the trade data, Chinese exports jumped 9.9 per cent while imports rose 2.4 per cent in September. This saw the monthly international trade surplus rise to $US27.7 billion. The solid rise in exports suggests that global demand may be holding up a little better than feared. The rise in imports suggests stable, albeit moderate, demand growth from China for the raw materials that go into the production chain which is where the good news for Australia comes in. Both sides of the trade data are positive.
One notable aspect of the data was the 4.1 per cent rise in iron ore imports which, according to Bloomberg data, were 65.01 million tons in September. This rebound in import volumes for iron ore fits with the recent news of sharply stronger iron ore prices which have rebounded around 30 per cent since falling to a three-year low of $US86.70 a tonne in early September. With iron ore prices holding recent gains in the first half of October at over US$110 a tonne, it is likely that Chinese import volumes have continued to rise.
It is a simple fact when analysing global economic conditions that higher trade volumes are associated with strong global economic growth and vice versa. This was seen recently during the global economic and financial crisis, which saw trade volumes fall precipitously as the global economy shrunk.
I agree! The China trade bounce is encouraging. There may be some seasonal effects but the global economy has a repeated pattern in the past years of rallying through Christmas on inventory rundowns and restockings associated with great Western shopping spree.
But it’s simply inaccurate to highlight growing iron volumes without referencing value. As I noted earlier today, despite a breakout month for Chinese trade, and a 7.3% rise in ore import volumes from Australia, the value of total imports was smashed by minus 18%. And the Kouk’s favourite, iron ore, was monstered for 29.3% year on year. How can you leave that out?
The Kouk’s cup brimmeth over.
