More economic doom and gloom as China has joined the slump in exports from Asia and German and French manufacturing are in freefall, pointing towards a deepening recession in Europe.
China’s January exports plunged by just over 25% in February, joining Japan with a 46% slump and a 60% fall in Taiwan and a 50%-plus drop from South Korea. It was the largest fall in the four months of declining exports as China was dragged into the global slowdown.
And Japanese and German wholesale prices are falling and the UK economy is shrinking.
The news from China confirmed that the economy isn’t rebounding, as some analysts had been suggesting.
The 25.7% fall in exports was almost matched by a 24.1% drop in imports as the domestic economy remained sluggish — the fall was helped by lower prices for oil and other commodity imports.
Some of these imports do not have to be bought: China is presently engaged in some large scale buying of copper, aluminium, zinc, lead, cotton and perhaps corn and soybeans to replenish Government stocks at current low prices.
Exports fell to $US64.9 billion and imports to $US60.1 billion: the resulting trade surplus was $US4.84 billion, compared with $US39.1 billion in January and a November’s record of $US40.1 billion, so the fall has been short, sharp and brutal, much like that seen in Japan, South Korea, Taiwan and other Asian economies.
It means China’s trade surplus has fallen from the record $US40 billion last November, to just a tenth of that figure, $US4.8 billion, last month. It was the biggest fall since western analysts started tracking Chinese exports in the mid 1990s.
Japan has more grim news on inflation as its wholesale prices fell at a faster rate in February. The Bank of Japan said the country’s producer prices dropped 1.1% in February from February last year. That was much faster than the 0.3% fall in January.
Like China earlier, prices in the manufacturing and wholesaling sectors are now falling faster than consumer inflation. Producer prices fell 0.4% in February from January, when they dropped a revised 1.1%.
Germany and France posted more grim data Tuesday. In Germany, producer prices fell by 1.2% month-on-month in January and industrial output slumped in January as Europe’s biggest economy and major exporter was hit hard by the global downturn.
Industrial orders in January fell 8.0%, according to an initial estimate from the economy ministry, down from a downwardly revised 7.6% fall in December. January’s industrial orders were 37.9% lower than a year before, with overseas orders down 42.5%.
Economists had expected the downturn to ease, forecasting a drop of 2.4% for January.
The continued fall in orders means that the German economy is unlikely to start pulling out of its worst recession in six decades. Government officials forecast the economy will shrink by at least 2.25% in 2009.
French industrial production fell for a six month in a row, but the fall in January was much sharper than market forecasts.
The Government’s statistical agency said production plunged dramatically by an annual rate of 13.8% in January, the biggest drop since the official series began in 1980. The fall was 3.1% from December (nowhere near as bad as the 10% plunge seen in Japan).
France is now set to follow Germany, Italy and the UK into a severe downturn in 2009 after looking as though it would escape.
The British economy shrank by 1.8% in the three months to February, the National Institute of Economic and Social Research said on Wednesday, following a fall of 1.7% percent in the three months to January.
And New Zealand this morning cut its official cash interest rate by 0.50% to 3%, 0.25% under Australia’s cash rate. Goldman Sachs JBWere said this morning it expects the Reserve Bank here to cut cuts by 0.50% when the board meets next month.