South Korea November exports plunge as China-U.S. deal still in dark

By Choonsik Yoo and Joori Roh

SEOUL (Reuters) – South Korean exports in November fell for the 12th month in a row and far more than expected, denting hopes for the global manufacturing sector stabilizing as a much-awaited China-U.S. trade deal is still in darkness.

Exports declined 14.3% in November from a year earlier, trade ministry data showed on Sunday, far below a median 10.2% fall tipped in a Reuters poll and missing even the worst forecast in the survey of an 11.1% loss.

It was also the second-worst drop in overseas sales in nearly four years as global semiconductor prices failed to turn around while China, the country’s biggest export market, continued to cut down purchases from its smaller neighbor.

The surprisingly weak November data from a manufacturing powerhouse, which reports monthly trade data ahead of major exporting nations each month, underscores the global economy still far from a turning point.

“The optimism for the first-phase trade deal between the United States and China will take time before actually boosting exports, and today’s poor data means the turnaround in exports is taking longer than expected,” said Chun Kyu-yeon, economist at Hana Financial Investment.

Shipments to China fell 12.2% in November from a year earlier, while overseas sales of semiconductors, South Korea’s top export item, tumbled by 30.8% in value as prices plunged this year from a super-rally last year.

Imports fell 13.0% on-year in November, also missing an 11.9% contraction tipped in the survey. That brought the November trade balance to a $ 3.37 billion surplus, versus a $ 5.34 billion surplus a month earlier.

Sunday’s data left shipments for the first 11 months of this year 10.7% below a year earlier, putting the country on track for its worst annual exports performance since a 13.9% fall in 2009 during the height of a global financial crisis.

South Korea’s economy, the fourth-largest in Asia and heavily dependent on exports, has been hit especially hard by cooling global trade and a prolonged tariff war between China and the United States.

On Friday, the central bank trimmed its 2019 economic growth forecast for the fourth time this year to the lowest in a decade, and also lowered next year’s forecast.

The downgrades came even after the Bank of Korea cut rates twice this year, the most recent cut coming in October. Many analysts expect the central bank to ease policy further next year to support the stuttering economy.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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More weak exports data, this time from South Korea

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Singapore exports fall for the seventh month

Singapore Non-oil domestic exports (NODX) data for September down for the seventh straight month 

NODX last month fell 8.1% year-on-year (Reuters poll had the central estimate at -7.0%)

  • electronics shipments -24.8%

On a seasonally adjusted month-on-month basis, exports fell 3.3% in September 

  • expected -3.0%
  • +6.7% in the previous month

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More poor South Korean data – preliminary data for July show exports plunge

South Korean July 1-20 exports (data via the Customs agency, Reuters)  

  •  -13.6 % y/y

July 1-20 imports

  •  -10.3 % y/y

Semiconductor exports -30.2% y/y 

‘Canary in the coalmine’ is often how the performance of SK is viewed. If these are anything to go by its an ex-canary. There will be impact in these from Japan’s move on curbing exporting technology products to the country. 

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US will announce complete cutoff to Iran oil exports on Monday – report

Bullish news for oil as the US gets aggressive with Iran on oil

Bullish news for oil as the US gets aggressive with Iran on oil

The US will no longer waive Iran sanctions for certain importers, the Washington Post reports.

The news should be a large tailwind for crude prices this week as the US gets serious in efforts to limit Iran’s exports, and cut them to near zero. In September of 2018 the US was expected to be tough but ultimately granted broad waivers in a move that caused the Q4 plunge in crude prices.

This time this US isn’t backing down.

“On Monday morning, Secretary of State Mike Pompeo will announce to the media that, as of May 2, the State Department will no longer grant sanctions waivers to any country that is currently importing Iranian crude or condensate,” the Post report says, citing two sources.

WTI crude is currently up 31-cents to $ 64.31 but the market is sleeping on this development. It’s should provide a significant boost to oil prices, CAD, NOK and any other oil exporters. One caveat in the report is that Pompeo will also announce offsets through commitments from other suppliers such as Saudi Arabia and the UAE. Those details will be important.

Still, it’s highly unlikely there is enough spare capacity out there to make up for Iran’s current exports of 1.25 million barrels per day.

Another issue to watch will be how Iranian importers respond. India has continued to be a significant buyer. Russia could also help Iran get oil to market.

Technically, the chart I’m watching is Brent. It’s up 34-cents to start the week and testing the 61.8% retracement of the Q4 rout. A break above it could signal a rally to as high as $ 86.

Iran oil
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Japan exports fall for third month on waning external demand, raises economic risks

© Reuters. FILE PHOTO - Birds fly in front of Mt. Fuji and a crane at a port in Tokyo © Reuters. FILE PHOTO – Birds fly in front of Mt. Fuji and a crane at a port in Tokyo

By Tetsushi Kajimoto

TOKYO (Reuters) – Japan’s exports fell for a third straight month in February in a sign of growing strain on the trade-reliant economy from slowing external demand and a Sino-U.S. tariff war.

Ministry of Finance data showed on Monday exports fell 1.2 percent year-on-year in February, more than a 0.9 percent decrease expected by economists in a Reuters poll.

It followed a sharp 8.4 percent year-on-year drop in January, marking a third straight month of falls due to declines in shipments of semiconductor production equipment and cars.

The trade data comes on top of a recent batch of weak indicators, such as factory output and a key gauge of capital spending, which have raised worries that a record run of postwar growth may come to an end. Some analysts say a recession cannot be ruled out.

The Bank of Japan last week cut its view on exports and output, while keeping policy unchanged. Yet, extended weakness in exports could put it under pressure to deliver more easing, especially as inflation remains well off its 2 percent target and pressure on businesses and consumers continues to rise.

Slowing global growth, the Sino-U.S. trade war and complications over Britain’s exit from the European Union have forced policy makers around the world to shift to an easing stance over recent months.

The trade war between the United States and China – Japan’s largest export markets – has already curbed global trade.

Monday’s trade data showed exports to China, Japan’s biggest trading partner, rose 5.5 percent year-on-year, rebounding from a 17.4 percent drop in January. However, overall trade to the Asian giant remained weak, as even after averaging effects of the Lunar New Year holiday, China-bound shipments declined 6.3 percent in the January-February period from a year earlier.

Japan’s shipments to Asia, which account for more than half of overall exports, fell 1.8 percent, down for a fourth straight month.

U.S.-bound exports rose 2.0 percent, but imports from the United States grew 4.9 percent, resulting in Japan’s trade surplus with the country declining 0.9 percent year-on-year to 624.9 billion yen in February.

Japan’s still-large surplus with the United States raises concerns among Japanese policymakers and auto exporters that Washington may impose hefty duties on its imports, analysts say.

Imports of Japanese cars make up about two-thirds of Japan’s $ 69 billion annual trade surplus with the United States, making Tokyo and Beijing targets of criticism by Trump.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Consumers, weak exports seen curbing U.S. fourth-quarter growth

© Reuters. FILE PHOTO: Shoppers carry bags of purchased merchandise at the King of Prussia Mall, United States' largest retail shopping space, in King of Prussia © Reuters. FILE PHOTO: Shoppers carry bags of purchased merchandise at the King of Prussia Mall, United States’ largest retail shopping space, in King of Prussia

By Lucia Mutikani

WASHINGTON (Reuters) – The U.S. economy probably slowed in the fourth quarter, held back by softer consumer spending and weak exports, which could leave 2018 growth just shy of the Trump administration’s 3 percent annual target.

The Commerce Department’s gross domestic product (GDP) report to be published on Thursday at 08:30 a.m. (1330 GMT) will offer the latest assessment of the impact of President Donald Trump’s economic policies, including deregulation, tax cuts, increased government spending and tariffs aimed at securing more favorable trade deals.

Trump has touted the economy as one of the biggest achievements of his presidency and declared last July that his administration had "accomplished an economic turnaround of historic proportions."

Gross domestic product probably increased at a 2.3 percent annualized rate in the fourth quarter, according to a Reuters survey of economists after expanding at a 3.4 percent pace in the July-September period. However, the survey was completed before the release of December wholesale and retail inventories as well as housing, factory orders and goods trade deficit data, which led many institutions to downgrade their forecasts.

The release of the fourth-quarter GDP report was delayed by a 35-day partial shutdown of the government that ended on Jan. 25, which affected the collection and processing of economic data.

The Atlanta Federal Reserve is projecting GDP grew 1.8 percent in the October-December quarter, which would be the slowest in nearly two years. Economists are forecasting that the economy grew about 2.9 percent in 2018, which would the best performance since 2015 and better than the 2.2 percent logged in 2017.

"This is as good as it gets for the first Trump administration," said Joe Brusuelas, chief economist at RSM in New York.

FADING FISCAL STIMULUS

The economy is slowing as the boost from the Trump administration’s $ 1.5 trillion tax cut and more government spending fades. Growth is also being restrained by a trade war between the United States and China, which economists say is making businesses and households more cautious about spending.

"The tax cut was not a game changer, it did not result in a permanent lifting of the trajectory of growth, just a temporary increase," said Brusuelas, who estimated the tax cut effect peaked in October.

The slowdown will come at time when the economy’s outlook is also being clouded by signs of cooling global demand and uncertainty over Britain’s departure from the European Union. These factors support the Federal Reserve’s "patient" stance towards raising interest rates further this year. Fed Chairman Jerome Powell reaffirmed the U.S. central bank’s position in his testimonies before lawmakers on Tuesday and Wednesday.

Growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity, is expected to have slowed considerably from the third quarter’s robust 3.5 percent rate, but still benefits from a strong labor market.

Trade tensions with China could constrain the economy for a while. U.S. Trade Representative Robert Lighthizer told lawmakers on Wednesday that Washington’s issues with China were "too serious" to be resolved with promises from Beijing to buy more American goods and a threat of higher tariffs could loom over trade with China for years.

The trade dispute has combined with a strong dollar and weakening global demand to undercut export growth. It also led cautious businesses to hoard imports, causing the trade deficit to widen.

The trade shortfall is seen subtracting at least half of a percentage point from fourth-quarter GDP growth after slicing off 2 percentage points in the July-September period.

With consumer spending slowing, some of the imports probably ended piling up in warehouses. That is expected to have accelerated inventory accumulation, which could offset some of the anticipated drag on GDP growth from the trade deficit.

But the inventory boost would come at the expense of growth in the first quarter, which is already looking soft with most manufacturing measures weakening in January and February.

"Inventories could be more of a negative factor for future growth than we had anticipated," said Daniel Silver, an economist at JPMorgan (NYSE:) in New York.

Inventory investment added 2.33 percentage points to GDP growth in the third quarter. Business spending on equipment is also forecast to have remained moderate in the fourth quarter. It has slowed since the first quarter of 2018.

Residential construction was probably a drag on growth in the fourth quarter. Homebuilding has contracted since the first quarter, weighed down by higher mortgage rates, land and labor shortages as well a tariffs on imported lumber.

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ICYMI – South Korea’s exports fell in December (implications for global growth)

Posting this data ICYMI over the break. South Korea is often cited as a canary in the coalmine for global growth.

December exports fell 1.2% y/y

  • vs. expected +2.5%
  • Exports to China -13.9%
The data highlights concerns that the US / China trade war is impacting on global, and Chinese, growth. Talks between the two though are, apparently, progressing well. 

On the imports die in December, +0.9%

  • +4% expected

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China trade balance (Nov.), exports and imports fall from Oct. and miss median estimates

Trade balance data for November from China

Yuan terms

China trade balance CNY 306.04bn for a beat (note this in yuan, local currency, terms)

  • expected CNY 226.50bn, prior was CNY 233.63bn

Exports +10.2% y/y for a miss

  • expected +13.8%, prior was +20.1%

Imports +7.8% y/y for a miss

  • expected +18.3%, prior was +26.3%

USD terms

China trade balance USD 44.74bn, a beat in USD terms also but do note the fall in both exports and imports in the month in dollar terms

  • expected $ 34.00bn, prior was $ 34.022bn

Exports +5.4% y/y miss

  • expected 9.46%, prior 15.6%

Imports +3.0% y/y miss

  • expected 14.0%, prior was 21.4%

Read the results in yuan or USD terms … both export and imports slumped.Trade wars, eh?

I mentioned on Friday (see link below) this data may well impact on the Australian dollar. Can’t see this as being anything other than a negative input. Perhaps the blow will be cushioned by the fall in the AUD during Friday trade and a close within spitting distance of the week’s low? Or perhaps not!

Its almost as if the market saw this coming 😉

Anyway, there is nothing to be done until markets get underway again on Monday. Enjoy the balance of the your weekend all!

More:

China’s November trade surplus with the US is USD 35.55bn

  • was USD 31.78 bn in October 

For background:

ps. It looks like China’s Nov. inflation data will be published Sunday (9 Dec. 2018) at 0130GMT. I don’t know if I’ll be around for that, day of prayer and all that (now you know I’m full of it 😀 ). But its the trade data the one likely to impact the most.  

  • November CPI expected 2.4%, prior 2.5%
  • November PPI expected 2.7%, prior 3.3%

  

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Singapore exports – latest data shows continued growth

The y/y exports figures from Singapore picked up in October. Surge in pharmaceutical shipments, electronics sector contracted 

Singapore October non-oil domestic exports +4.2% m/m seasonally adjusted (beating the median from Reuters poll of +2.8%)

  • +8.3% y/y (poll +1.0%)

By country:

NODX to US +32.8% y/y

  • to China -25.8% y/y
  • to Europe +37 % y/y

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