Santa Claus will be busy this Christmas despite the bad news bears
WHEN YOU SEE an indicator of economic performance showing record levels of activity it can be tempting sometimes to say: 'Well, that can't last much longer. We must be pretty much at the top of the cycle on this one.'
I did it last year in this column when Asian export growth had topped 20 per cent year over year and that growth rate had started to come down for a few months.
Almost immediately export growth went soaring back up again and a year later was near 30 per cent.
But others are singing the tune now. Our report yesterday on the latest Hong Kong trade figures was headlined 'HK export growth fall is part of a global drop' and the text underneath spoke of slumping demand for information technology products, weaker Christmas orders from the United States and a weakened global outlook.
Well, yes, with steeply rising oil prices you might expect all this but has it really showed up yet? The September export figures for Hong Kong were certainly no occasion for such gloom. They were down a little but not much and raw figures on exports normally go up and down like a seismograph track in an earthquake.
The first chart shows you the year-on-year growth rate for all of Asia, done on a six-month average basis to knock out some of that volatility. July this year marked the highest growth rate for all the data I have on record and I think I would need more than just that very slight dip for August to say that it is all downhill from now on.
Admittedly, the September numbers are also now in for about 80 per cent of the regional total in exports and they indicate that the dip probably steepened in the month.
But I would still hesitate to say that the cycle is now going the other way and one reason for it is that there is not yet much sign of that slumping demand for technology products and Christmas toys in the US.
The second chart shows you the growth in worldwide sales of US semiconductors, way up in the internet boom of 2000, way down in the aftermath and then a recovery again. The growth rate has come down again over the last two months of data available but the latest figure is still 34 per cent year over year and that does not rate as a slump in my book.
Look elsewhere and the same general story shows up.
Overall US imports of goods are still rising strongly, US retail sales growth has slowed down a little but is still running at 7 per cent and US wholesaler sales growth is running at 15 per cent. It seems to me that Santa Claus will still be a busy man this Christmas.
Look further abroad and other major markets for Asian goods also show continuing strong demand. Euroland import growth, for instance, is running at more than 20 per cent in US dollar terms and that is the currency that concerns us here as Asian exports are all in effect priced in US dollars.
It should not be this way any longer. If oil prices alone were not enough to make consumers tighten their belts, the US in particular seems to be asking for trouble with a current account deficit now running at well over 5 per cent of gross domestic product and some of that trouble is already showing up in a weaker US dollar.
Perhaps reality will strike after the presidential election in a few days time. Perhaps it is just being staved off and the result will be a bigger consumer slowdown later, one that will have a dramatic impact on Asian exports.
I do not know. All I do know is that the expectation of bad news to come may have led some people to say it is already here when they do not yet have the evidence of it to hand. There is simply as yet little sign that demand for manufactured goods from Asia has slackened much despite rising oil prices.