Export Recovery Remains Elusive in China and Germany

As 2023 approaches its end, signs of sluggish trade and manufacturing activities have emerged in several major exporting nations, raising concerns about the elusive recovery in global commerce.

China, one of the world’s key export players, experienced a 6.4% year-over-year drop in exports in October, a figure worse than anticipated and comparable to its weak performance in the same month of the previous year. This decline has led to concerns about weakening global demand, with analysts suggesting that the recovery in global seaborne trade, significantly driven by China, may be further delayed.

In a similar vein, Taiwan witnessed an unexpected downturn in manufacturing exports, with overseas shipments decreasing by 4.5% in October compared to the previous year. This setback followed earlier optimism that global demand for the island’s tech products was on the rebound. Economists are closely monitoring the coming months to discern whether demand will pick up, or if these subdued figures portend a slowdown that could extend into 2024.

Manufacturing Slowing Down?

Germany, Europe’s largest economy, is also grappling with a manufacturing slowdown. Industrial output in the country fell for a fourth consecutive month in September, primarily driven by declines in the auto, electronics, and pharmaceutical sectors. This economic strain led to a 0.1% contraction in Germany’s GDP in the third quarter, and analysts predict a similar decline in the final quarter, potentially leading to a mild recession.

The outlook for 2024 doesn’t appear much brighter, as German companies operating abroad express greater pessimism about the economic prospects over the next year, according to a survey conducted by the DIHK Chamber of Industry and Commerce.

Some Positivity Prevails:

Nonetheless, some positive indicators suggest that a rebound may be on the horizon. The Kiel Trade Indicator’s October edition showed positive month-on-month export figures in all major economies except China. This unexpected development is partly attributed to robust EU trade performance, even as the economic output in the EU has recently contracted. The five largest EU economies, including Germany, France, Italy, Spain, and the Netherlands, managed to increase their manufacturing exports in October, providing a positive start to the fourth quarter.

Vincent Stamer, head of Kiel’s trade gauge, noted, “It is quite surprising that the good figures are being driven by EU trade, where economic output has been shrinking recently. The EU’s five largest economies were able to increase their exports in October, which is a very positive sign at the start of the fourth quarter.”