As fears over another U.S. economic downturn heats up, Asian exporters are bracing themselves for the worst. All eyes are on our leaders in Washington who passed a fiscal stimulus package yesterday that they hope will be the catalyst for change.
Decreasing demand from the American market has already pushed many Asian suppliers to embrace reform in a variety of ways. According to NYTimes Hong Kong bureau chief, Keith Bradsher, some are simply lengthening their worker’s holidays whereas others are taking a more proactive approach by investing in new technologies or expanding their presence in additional countries.
Such shifts in behavior have been in response to not only external shocks, but also worries over the stability of suppliers’ indigenous economies. While there are those who remain optimistic about Asia’s continued growth despite a U.S. slump, Goldman Sachs CEO, Lloyd Blankfein, is not one of them. “It’s impossible for [there] to be a complete decoupling,” he said at this year’s World Economic Forum meeting in Davos. “How can growth be maintained if the ultimate source of demand is receding?”
Yiping Huang, head of Asia-Pacific analysis at Citigroup, agrees that the global nature of today’s businesses means possible recessions in Europe and the U.S. will have ramifications well beyond the borders of those countries. Earlier this month Citigroup actually reduced their average estimate for Asian economic growth by four-tenths of a percent.
Panjiva’s independent examination of apparel export data mirrors the deceleration seen in global trade. Shipments from China to the U.S. dropped 61% from the third to fourth quarter of 2007. In comparison to the same quarters for previous years, the numbers are considerably lower: (23%) in 2006, and 1.3% in 2005. India posted a similar decrease, with the change in exports from Q3 to Q4 in 2005 and 2006 falling a modest 1.9% and 5.2% respectively, while in 2007 it slipped 29%.
Wondering if such slides were systemic, our team looked at data from Middle Eastern and African economies. Sure enough, those trends continued. In Egypt the changes from Q3 to Q4 was up 22% in 2005, down 19% and 58% in 2006 and 2007 respectively.
When taking a step back though and looking at the annual figures, things are less gloomy. China’s apparel exports, a bit sluggish during the last quarter of 2007, did rise to record levels that year, peaking just below 252,000 apparel shipments, well above the 146,000 in 2006 and 101,000 in 2005. India also demonstrated record growth, where shipments to the U.S. jumped from 18,500 in 2005 and 24,000 in 2006, to 48,000 in 2007. Over in Egypt, exports increased an astounding 117% from 2005 to 2006 (largely because of duty free access to the U.S. market), before cooling off in 2007, where it locked in a still impressive 22% spread.
Overall, 2007 was a good year for the world’s biggest apparel exporters, but with the U.S. subprime crisis ringing in the New Year, the industry will need to proceed with caution if it hopes to stay on course.
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