For anyone who takes an interest in global economics, our eyes have been largely looking at Western economies for tales of woe, stagnation and debt for some time. But there are signs that this situation may be starting to reverse.
From our last post highlighting the recovery in the UK and some of the European countries we know turn our eyes to Asia where this week the major share indices all took a tumble.
The problem seems to have come from the economic data being released from the two big players in the Asian market – China and Japan. Both reports seem to be pointing towards a slowdown in the area. The Hang Seng fell by nearly 2% and the Nikkei index closed down around 1%.
So what was in these reports to cause such a steep fall? Well although it was not much of a surprise given the situation Japan finds itself in, the record deficit reported was still larger than expected. What was probably more damaging though was that it’s 2013 growth estimates were revised down to combine with this bad news.
The startling figure in the Chinese figures was the fall in it’s export levels – a huge drop of 18%. There were very few analysts expecting a fall of this magnitude and the markets took the news very badly indeed. The Asian sell off was swift and heavy and even took down the linked Australian share index down 1% too. There’s an interesting piece on the Newsnight programme currently available on the BBC website – I use this to watch BBC Iplayer in Ireland and
Most of the big miners took a hit, companies like BHP and Rio Tinto supply the raw materials that fuel the growth in the Asian market particularly China. The hits were inevitable simply because the values of the metals fell in line with the news, copper fell to it’s lowest level since early last year. Iron ore futures and steel also both dipped sharply in response to the publication of the data.
China is beginning to feel pressure on all fronts economically, and even reported that very rare event a trade deficit of about $22 billion dollars in February, only twelve months ago the corresponding figure was another surplus, an enormous switch in fortunes. This is a sharp warning that the economic advantages that China has built it’s growth on are beginning to wane, you can only manipulate your currency value for so long and the competitive advantage of lower labour costs don’t last forever as an economy adapts.
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