PC surge boosts China trade; phase 1 purchases still failing to make a difference

China 2527 Cons. Discr. - Apparel 353 Cons. Discr. - Autos 918 Cons. Discr. - Durables 301 Coronavirus 377 Info Tech - Tech Hardware 589 Trade Balance 847 Trade Deals 885 U.S. 4472

The landscape for Asian trade activity has improved markedly in the past two months since most economies reopened after COVID-19 disruptions. Panjiva’s analysis of macroeconomic data for 15 countries shows that average exports declined by just 2.3% year over year in July. That compared to a 6.2% slide a month earlier and was the slowest rate of decline since December. It also represented an outperformance of the Americas’ regions 11.9% downturn which included a lackluster 15.9% decline in U.S. exports.

Asia’s recovery in July was largely due to a 7.2% improvement in exports from China Panjiva’s analysis of official data for China shows growth increased to 9.5% year over year in August, the fastest rate of expansion since March 2019. That’s come alongside an 8.2% rise in exports from Taiwan and an 8.3% improvement in Vietnam, while South Korea has continued to decline.

China leading recovery in Asian export growth

Chart segments global exports by origin. Calculations based on S&P Global Market Intelligence data.  Source: Panjiva 

The acceleration in China’s export growth was largely down to increased shipments of consumer goods. Exports of apparel climbed by 3.2% and 24.0% year over year in August having dropped by 14.3% in the prior three months to July 31. 

Furniture shipments accelerated to growth of 24.0% from 4.7%, potentially reflecting increased demand as households around the world extended the period spent at home due to COVID-19 restrictions. 

Exports of computers jumped by 41.7% in August from 32.6% in the prior three months for similar reasons. More surprisingly was a 12.2% increase in automotive components compared to a 17.7% slide in the prior three months, perhaps indicating a return to health for one of the industries that was most affected by COVID-19.

Consumer demand recovery drives Chinese exports higher

Chart segments exports from China by product. Calculations based on China General Customs Administration data. Source: Panjiva 

One cloud in the sky however is that Chinese imports fell by 2.1% compared to a year earlier, the second month of declining shipments which bodes ill for supplies from other countries including the EU and U.S. 

Imports from the U.S. were weak with an increase of just 1.8% year over year in August following an improvement of just 3.6% in July. That would suggest that purchases under the phase 1 trade deal remain weak. As discussed in Panjiva’s research of Sep. 4 both sides appear to be happy to ignore that factor however in continuing relations.

For context in 2017, the baseline for the deal, phase 1 products represented 60.9% of Chinese imports from the U.S. Finally, a 20.0% surge in exports from China to the U.S. in August was the fastest rate of increase since Feb. 2018 and may indicate tariffs are becoming less effective.

Phase 1 purchase commitments not moving the needle

Chart segments Chinese trade with the U.S. by direction. Calculations based on China General Customs Administration data. Source: Panjiva 

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