Wednesday, June 9, 2010

Chinese export boom

News that China's exports surged 50% in the 12 months ended May have helped to energize the market today. Although the data is not yet official, I've indicated on this chart of China's exports (with a red arrow) where the May data would be based on the report. May '10 exports are now 10% higher than they were in May '08 (this data is not seasonally adjusted), before the global slowdown hit. This news strongly suggests that China's economy has made a complete recovery, and that has to be good news for the global economy as well.


septizoniom said...

only you would find the good in china's beggar thy neighbor policy

John said...

A related news item; Caterpillar (CAT-NYSE) has raised their dividend on their common stock. Cat is a manufacturer of large construction and forestry equipment with global sales. IMO they would hardy raise an optional dividend if they saw an economic contraction on the horizon. It is a sign of confidence by some very business savvy people.

John said...


You have blogged often on inflation and we have had some interesting discussions regarding it.

I have just read an interesting opinion that inflation is currently higher in China than is reported by the official statistics. It is one of the reasons for the recent spat of suicides in some of the factories. Wages are not keeping up with prices and workers without recourse becoming depressed over a bleak future. To combat this, raises are being instituted in more companies, sometimes several times.

I guess where I am going with this is that this will increase the prices of many exports from China, as well as other emerging countries making US products more competitive. In short, rising prices in many emerging markets could be 'exported' here, possibly increasing our inflation rate. In the opinion of the writer it argues for investors to begin positioning in more inflation protecting securities.

It seems to me the investment of choice for the majority of retail investors is bond funds and deposit accounts. These to me are very crowded trades. They have been popular (and successful)so long I am really wondering how much longer they can work. If we take a financial meltdown off the table (another snake everybody seems to be seeing these days), how long can it be before the inflation in China, India, Brazil, and even Canada, makes its way here?

Its kinda like the oil I know is out there in the Gulf but still hasn't hit my beach yet. The tourists are fat and happy lying in the sun but I know its coming. I just don't know when.

Scott Grannis said...

septi: why is selling lots of cheap products to the world China's way of hurting us? If I want to sell my services cheap to my neighbor, he is the one who benefits. Trade is not a zero sum game; everyone can benefit.

Scott Grannis said...

John: Seems to me there is a new and encouraging trend in place in China. They are moving to improve the lot of workers by increasing wages, liberalizing capital flow restrictions, and now, revaluing the currency. All of this gives more power and money to the consumer at the same time it increases the cost of labor (i.e., real wages). Sooner or later this should find its way to higher prices for Chinese goods in our market, and that will contribute to higher inflation.