Thursday, 12 January 2006

Trade surpluses and deficits widen

Global trade imbalances look like they are going to get worse before they get better.

In China, the trade surplus soared last year. Reuters reports:

China's trade surplus more than tripled to $102 billion in 2005, data showed on Wednesday, but December figures also reinforced a more recent trend of weakening export growth...

China's December exports rose 18.2 percent from a year earlier to $75.41 billion, according to precise figures posted on the Web site ( of the General Administration of Customs...

Imports, up 22.2 percent at $64.4 billion, rose faster than exports for the second consecutive month, pulling in the trade surplus to $11 billion from $11.1 billion a year earlier.

Things may change this year.

The latest trade figures showed a steady slowdown in the growth of the trade surplus last year. A first-quarter gap of about $25 billion over a year earlier narrowed to only about $5 billion in the fourth quarter... Some economists forecast the trade surplus would narrow in 2006 to about $100 billion...

Also on Wednesday, the National Bureau of Statistics said its business confidence index had fallen to 125.4 in the fourth quarter, down 2.2 points from the previous three months. The official Xinhua news agency reported that consumer sentiment toward the housing market in the southern city of Guangzhou had fallen sharply. Only 7.8 percent of families surveyed by the Guangzhou Municipal Bureau of Statistics planned to buy housing in 2006, a 4.8 percentage point fall from 2005, the agency said.

However, Brad Setser does not expect China's trade surplus to narrow this year, if at all.

To keep the trade surplus from expanding, Chinese imports need to grow about 15% faster than Chinese exports. Right now, I doubt that will happen.

Another major economy that reported an increased trade surplus this week is Germany. From Bloomberg:

Sales abroad, adjusted for working days and seasonal changes, declined 1.4 percent from October, when they dropped 0.8 percent, the Federal Statistics Office in Wiesbaden said...

Germany's trade surplus widened to 13.3 billion euros in November from 12.2 billion euros in October, said the statistics office. Adjusted for seasonal effects, the balance was 13.9 billion euros in November. Adjusted imports fell 4 percent, the report showed.

Elsewhere in Europe, though, we see trade deficits get bigger, for example, in France:

The French foreign trade deficit widened in November from October and analysts said the country was heading for a record shortfall in 2005, raising concern about exports and the competitiveness of French industry.

Data from the French customs authority showed on Wednesday that France had a trade deficit of 3.138 billion euros (3.8 billion dollars) in November compared to 2.434 billion euros in October.

And in the UK:

The goods trade deficit widened much more than expected to a record high in November on a dip in exports, surge in imports, and a deficit in oil for a fifth straight month.

The Office for National Statistics said on Wednesday the goods trade gap widened to 5.97 billion pounds from a revised 5.05 billion in October and more than a billion pounds above economists' forecasts for a deficit of 4.9 billion.

Meanwhile, the trade in services surplus narrowed to 1.48 billion pounds from 1.67 billion in October although within a range seen in recent months.

If the UK trade deficit improves, it might not be a cause for celebration; imports could fall if falling consumer confidence translates into weaker consumer spending.

Consumer confidence fell in December, the second consecutive year that seasonal cheer has failed to help Britons feel more optimistic about their economy, Nationwide Building Society said on Wednesday.

Its monthly index showed that overall consumer confidence fell 5 points to 96 from its November level of 101.

One country that, at the moment, probably doesn't have too much to worry about on its external balance is Japan.

Japan's foreign exchange reserves rose 3.63 billion dollars to 846.9 billion dollars in December, the second highest level on record, the finance ministry said.

The rise was largely because of the rising value of US government bonds, the ministry said.

And the overall health of the Japanese economy looks good too.

A key gauge of the current state of Japan's economy stood above the boom-or-bust threshold of 50 percent in November for the fourth straight month, the Japanese government said Wednesday.

Propelled by strong industrial production and a healthy job offers-to-seekers ratio, the index of coincident economic indicators marked 66.7 percent, the Cabinet Office said in a preliminary report...

The index of leading indicators, predicting economic developments six months ahead, came to 60.0 percent, moving above the 50-percent line for the second straight month.

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