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Saturday, Oct 26
Reliance on export growth may be miscalculation
- HSBC's chief economist Stephen King noticed something peculiar recently when he looked at growth forecasts from the firms' economists: They all cited exports as the engine of growth for the regions they covered.
- "The impossibility of every nation being able to sell more than it buys means some of the analysts must be wrong," Bloomberg notes, pointing to Caterpillar (CAT) and Unilever (UL) as evidence that "the bet on trade is flopping."
- Further evidence is provided by the CPB Netherlands Bureau for Economic Policy Analysis which recently said global trade volume slid 0.8% in August from +1.8% in July and by recent data which showed China's exports unexpectedly fell in September.
- Ultimately, "the trade slowdown stems mostly from developing nations, which had powered the world out of its 2009 recession," Bloomberg says. With the IMF cutting its forecast for emerging market growth and the ADB slashing its estimates for developing Asia, choppy waters may lie ahead.
- Emerging markets: EEM, ADRE, SCHE, GMM, VWO, DEM, EWEM, PXH, PIE, EWX, DGS, EMLB, EDC, EET, EMSA, EDZ, EEV, EUM, TLTE, HILO, EELV, EEMA, EMFT, DVYE, FEMS, EVAL, EGRW, EMCR, IEMG, EMDR, EEME.