The strategy implemented by governments around the world of devaluing their respective currencies is one that is usually effective at raising exports, yet in the current global environment these tactics are not working. Exemplified by the relationship between the United States and China, the fact is that what one economy imports, another exports and vice versa. The current slowdown of spending in countries like the US means that no matter how opportune the picture for exports in China, goods simply won’t be exported if no one is willing to purchase them. The recent boost in GDP seen in second quarter results for the United States is in large part due to the tightening of import spending, even though today’s strong dollar means that imports are exceptionally cheap. In a manufacturing economy such as China, these events are more than troubling. The changes made over time by Beijing are meant to keep growth sustainable. This is very dependent on the country’s trading partners, but the restless nature of exports makes this more difficult than imagined.
Economies other than China that are more reliant on the world’s need for their manufactured goods and commodities include South Korea and Canada, both of which are appropriately concerned for the effect that the downturn in demand has had on their economies. Exports recently measured in South Korea forecast a slide of over -10.00%, instead missing expectations by a wide margin after exhibiting a -14.70% drop in the latest reporting period. Canada has had stagnant movement in their GDP, slowly trudging downward by -0.10% during the last quarter, marking a recession in the works for America’s neighbor to the north. The negative news coming from these two economies only adds to the worry felt in the markets for the sorry state of exports, as each global economy desperately tries to maintain balance in relation to one another during this volatile period.
Dark Horizon for Exports
Market Trends - 01/09/2015