There are a lot of red arrows in the global economic data. But economists are hopeful that the current worldwide slowdown may be stabilizing.
South Korean exports in September tumbled 8.3% from a year ago.
While that number is ugly, it’s an improvement from August’s 14.9% plunge, and it’s better than the 11.8% drop forecast by economists.
The world’s ‘canary in the coal mine’ is gasping
Economists look to Korean exports as they are the world’s imports. Major traded goods range from automobiles and petrochemicals to electronics such as PCs and mobile devices. Because this report is the first monthly set of hard economic numbers from a major economy, economists across Wall Street dub South Korean exports as the global economic “canary in the coal mine.”
“We believe exports are likely to improve on a sequential basis, helped by stronger demand in the US for consumer electronics as we approach the start of year-end festive demand,” Barclays Wai Ho Leong and Angela Hsieh said. “This may alleviate some weakness due to high inventory buildup, in our view.”
China lacks luster
The general theme across the reports on September’s economic activity is that things didn’t get too much worse. In other words, while things were not good, they weren’t terrible.
“Asian manufacturing remains lackluster,” Capital Economics’ Krystal Tan said.
- Business Insider Australia
Earlier, we learned that China’s official and unofficial Caixin purchasing managers indices (PMI) unexpectedly improved to 49.8 and 47.2, respectively, in September.
Again, that improvement must be caveated by the fact that any reading below 50 still reflects contraction in the industry.
“Tepid PMIs suggest that the economy still needs to find its footing,” Barclays Jian Chang, Shengzu Wang, and Yingke Zhou wrote.
Japan could’ve been worse
Japan, the world’s third-largest economy behind the US and China, also didn’t have great news.
The Bank of Japan’s tankan survey of large manufacturers fell to 12 in September from 15 three months ago, a sign that sentiment among Japan’s biggest businesses is deteriorating.
But again, it could’ve been a lot worse considering the volatility in the developing world.
“This points to limited traction of the headwind from slowdown in EM economies, in particular China, into Japan’s overall economic activity, though we admit could begin to affect non-manufacturers over the next few months,” Deutsche Bank’s Mikihiro Matsuoka said.
Europe is ‘disappointingly modest’
Markit’s eurozone manufacturing PMI slipped to 52.0 in September from 52.3 in August.
While that 50+ reading reflects growth, it signals deceleration. Germany, Italy, and Spain all reported decelerating growth.
“Despite unprecedented central bank stimulus and substantial currency depreciation, the eurozone manufacturing sector is failing to achieve significant growth momentum and even risks stalling again,” Markit’s Chris Williamson said. “The pace of expansion has been range-bound since the uplift following the start of QE earlier in the year, remaining disappointingly modest and even slipping to a five-month low in September.”
The US has a ‘sore thumb’
Wednesday’s stunningly bad Chicago PMI report was just the latest in a series of disappointing regional activity reports out of the US in September. The Dallas Fed’s manufacturing report and the New York Fed’s manufacturing report were just depressing.
- TD Securities
“The manufacturing sector has been like a sore thumb for the US economic recovery lately,” TD’s Millan Mulraine wrote Wednesday. “Since last year, this crucial sector has struggled to navigate against the headwinds coming from the collapse in global energy prices, the drag from the strengthening dollar on export activity and the weakening in global demand.”
Meanwhile, markets are rallying.