Monday, November 19, 2007

China Trade and Europe

This chart shows the exports to China and imports from China as seen in Exhibit 14 of the U.S. International Trade in Goods and Services reports. I adjusted the amounts by our CPI-U and then seasonally adjusted them.

It's looking more than a bit peaky on the import side.

This chart shows the difference between the imports and exports. I guess exponential growth at 1.3% per month wasn't sustainable long-term. Who knew?

It appears to be breaking just like the combined Long Beach and Los Angeles Cargo Traffic chart (from the link below).

So what does it mean? Europe, you are next. We appear to be done. Sorry about that. With the strong euro, you can buy plenty of stuff from China. Now all you have to do is figure out who will buy your products. We can't even afford to buy products priced in our dollars it seems (as China is still pegged to us), much less euros. Further, it seems you have some extra headwinds to think about.

Europe's property sector hit hardest
Economic activity across Europe is likely to have been hit by the higher financing costs resulting from the credit squeeze. At the same time, a significantly stronger euro and the delayed effects of higher European Central Bank interest rates since the end of 2005 are also likely to have acted as a brake on growth. More recently, a pick-up in inflation would have eroded consumer spending power.

An economy on the brink of snapping
It has been said that the road to every recession is signposted "soft landing". The end of this economic cycle looks like being no exception, even if the terminology is slightly different. This year's wishful thinking is dressed up as Goldman Sachs's "happy handover" or the ubiquitous "decoupling".

Forgive me for not investing in you. Welcome to the "decoupling" party. Good luck on that one.

See Also:
Long Beach Cargo Traffic
Exponential Growth and Immortality!

Source Data:
U.S. Census Bureau: U.S. International Trade in Goods and Services
St. Louis Fed: Consumer Price Index for All Urban Consumers: All Items (Not Seasonally Adjusted)
The X-12-ARIMA Seasonal Adjustment Program

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