There are signs that Asia’s export slump is bottoming out.
That is according to Goldman Sachs Group Inc economists who highlighted a substantial pickup in exports to the US from Asian economies, including Taiwan, Vietnam and India, that is effectively canceling out the fall in shipments from China.
“Initial shocks from the trade war might be behind us, with Asian exports to China recovering and tech exports catching up with stable non-tech exports,” Goldman economists led by Andrew Tilton wrote in a note.
“Also, a rebound in the Asian trade cycle seems overdue, with Asian exports undershooting trade partners’ activity growth and the current downturn being sustained longer than past cycles,” they wrote.
Chinese and US trade negotiators meet again in Shanghai this week for the first round of meetings between both sides since talks broke down in May.
Even if trade tensions escalate, an expected wave of supportive measures from governments and central banks to underpin economic growth would aid the trade recovery, Goldman said.
The US Federal Reserve is tipped to cut interest rates this week for the first time in a decade.
For sure, additional US tariffs on Chinese goods would have an impact.
“Our view is, however, that the escalation would likely be temporary ahead of an eventual trade agreement, and potential damages could be mitigated by ongoing shifts in supply chains,” the economists wrote.
“In the event of further escalation in the trade tensions beyond our baseline, Asian trade may undergo another downturn which, if sustained for the coming year, could make the current downcycle the longest since the 1990s,” they added.
Separately, China’s economy continued to weaken this month, bolstering the case for greater policy support to shore up growth as talks over the trade dispute with the US continue.
The slowdown is seen in a Bloomberg Economics gauge aggregating the earliest available indicators on market sentiment and business conditions.
“Trade disputes are still a key risk to both Chinese and other major economies,” David Qu (曲天石) from Bloomberg Economics said. “Producer prices are under pressure, as material prices may be influenced by the concerns about trade, and as we see in the PMI surveys, domestic confidence is still subdued.”
The official purchasing managers’ surveys for this month are due for release tomorrow.
The outlook for export-oriented small businesses eased this month, and an index gauging conditions for small companies slowed to the weakest in more than three years, with overall demand subdued and investment appetite down, according to economists from Standard Chartered PLC.
“We expect exporters to remain cautious on production and investment prospects, given weakening external demand on sluggish global growth and the protracted trade friction with the US,” Standard Chartered economists Shen Lan (沈蘭) and Ding Shuang (丁爽) wrote in a note.
Outbound shipments from South Korea also suggested weaker demand from overseas. Its exports fell 13.6 percent in the first 20 days of this month from a year earlier, indicating shrinking demand for components from Chinese assemblers of electronics such as iPhones.
Conditions reported by sales managers also weakened in the month due to low business confidence, especially in manufacturing, according to London-based World Economics Ltd.
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