Tuesday, February 03, 2009
Macro Man is still snowed in today, though at least this morning's snowfall lasted for 20 minutes rather than 20 cm. While he has very few hard and fast rules in life, one of them happens to be "when the UK transport authorities advise you to avoid travelling, you'd best follow their advice."
And so he finds himself at home once again today, watching a webcast of a conference he was supposed to attend this morning. So you'll have to pardon him if his attention is once again diverted...though not so much that he hasn't noticed a couple of new datapoints confirming that his favoured themes remain very much in play.
Over the weekend, South Korea released preliminary data for January external trade. The results were grim. Exports tumbled by a great-than-expected 32.8% y/y. While that is a terrible figure, looking at the actual total decline in exports is perhaps even more shocking- exports are down 47% since the middle of last year. So the theme of collapsing global trade looks to be alive and well.
Of course, the decline in Asian exports isn't happening in isolation. Sure, the dislocations in trade finance explain some of the decline in trade. But ultimately, the world's consumer of last resort has quit consuming, a development that should prove more enduring than the inability to finance shipping. The latest data on the US savings rate show an uptick to 3.6%; this is the highest non-distorted (via stimulus packages or Microsoft dividends) rate in more than a decade.
Macro Man would submit that regardless of the size and nature of any stimulus, household savings are on an inexorable upwards trend for another few years. And that spells trouble for those countries and companies whose growth model is based on selling stuff to Americans.
Perhaps China will fill the gap? After all, the Chinese have stepped on the fiscal stimulus gas, and domestic equities have put in a decent show so far this year. Perhaps the Chinese will take over the role of "big spender of last resort"?
Good luck with that. Beneath the surface, there is reason to for considerable worry with respect to Chinese growth. Anecdotals suggest a large and rising unemployment problem...which obviously explains some of the rationale for the stimulus. From Macro Man's perch, the actual story 9rather than the reported newsflow) from China looks set to get worse before it gets better. And given that Chinese policy is made based on the real story rather than reported statistics, it looks like we'll be waiting a while before a) Asian exports to China pick up, and b) USD/CNY goes lower (indeed, there's a non-zero chance that it drifts up from here.)