The US external trade is weakening rapidly. Its deficit has never been so important (measured in real terms and ex oil trade). Imports have a strong momentum. It reflects the White House fiscal strategy and it is done at the expense of American citizens. Not the good strategy. This large imbalance is also a good reason for the Fed to maintain its tightening bias in order to limit the domestic demand momentum. Powell has spoken many times of the non sustainable fiscal policy of the White House. This trade imbalance is just an illustration of it.
In May, the Chinese external trade balance was back to large surplus at USD 35.9bn. The rise in exports (+7% year on year) may be a good indication on world trade momentum. But the question on immediate outlook is not on exports but on imports. Chinese imports continue to shrink. This reflects a weak internal demand and a very limited impulse from China to the rest of the world, notably emerging and commodity producers’ countries.
To see the specificity of the current period, I’ve looked at imports and exports 3 month change from 20114 to 2014. Continue reading
Five charts to better understand the Chinese external trade momentum.
The main point is the change in regime after the 2009 crisis. Before it annual growth for both exports and imports was between 20 and 40 %. Currently and since 2011 their growth rate is close to 10 % and sometimes less.
These two figures explain why it is necessary for China to find new sources of impulse for its economic activity. The main sources of economic momentum have to be found in the Chinese economy not outside. Continue reading