Fears over the health of the world economy grow as eurozone factory output slide and Chinese exports shrink
- Latest: Eurozone industrial production shrank 1.7% in November
- Worst decline in almost three years.
- Introduction: China’s exports fell 4.4% in December
- Biggest fall in exports in two years as slowdown gathers pace
- But US-China trade surplus hits a record
Newsflash: The OECD thinktank has just warned that growth momentum is “easing” in most major economies.
In a new assessment of the world’s largest economies, the OECD says the biggest declines coming in France and Britain.
In the United States and Germany, the tentative signs of easing growth momentum, that were flagged in last month’s assessment, have been confirmed with easing growth momentum remaining the assessment for Canada, the United Kingdom and the euro area as a whole, including France and Italy.
European stock markets have fallen deeper into the red, following the disappointing fall in eurozone factory output.
Britain’s FTSE 100 is now down 66 points, or almost 1%. Italy’s FTSE MIB has shed 1.25%, while Germany’s DAX is 0.75% lighter.
Bert Colijn, senior eurozone economist at Dutch bank ING, fears that some of Europe’s largest economies could suffer a recession soon.
He says November’s decline in industrial production sinks hopes that growth picked up at the end of 2018:
Fears of a technical recession in large Eurozone economies are mounting as industrial production in November provided a harsh reality-check for economists.
The third quarter slowdown to just 0.2% GDP growth was expected to be followed by a bounce back in Q4, but the evidence is mounting that this is unlikely. Surveys have been dismal throughout the quarter, and actual production data is now confirming that bleak view on the Eurozone economy. Industrial production declined by -1.7% month-on-month in November and by -3.3% compared to November last year.
This sharp fall in eurozone industrial production suggests the world economy faltered in the last few months, warns Teis Knithsen of Kirk Kapital:
Something happened to the global economy in Q4 #1: Euro area industrial production fell by 1.7% in November, down 3.3% y/y. pic.twitter.com/RbGDznRMw1
Ireland suffered the biggest drop in industrial production in November, down by 7.5% month-on-month.
That was followed by Portugal (-2.5%), and Germany and Lithuania (both down 1.9%).
On an annual basis, eurozone industrial production was 3.3% lower than in November 2017 – a hefty fall.
Newsflash: Factories across the eurozone have suffered their biggest plunge in output in almost three years, in another sign that the world economy is slowing.
Industrial production across the euro area shank by 1.7% in November, data body Eurostat just reported.
In the euro area in November 2018, compared with October 2018, the production of capital goods fell by 2.3%, durable consumer goods by 1.7%, intermediate goods by 1.2%, non-durable consumer goods by 1.0% and energy by 0.6%.
In the EU28, the production of capital goods fell by 1.6%, intermediate goods by 1.1%, durable consumer goods by 1.0%, non-durable consumer goods by 0.6% and energy by 0.5%.
Patrick Zweifel, chief economist at Pictet Asset Management, argues that China needs to strike a trade deal quickly, and also implement more growth-friendly policies.
. #China export growth plunged in Dec (Y/Y) while momentum gradually declined further, reaching a pace in line with what export orders would point to in 5-month time
. 2 implications for Beijing: i) more eager to strike a deal ii) more aggressive measures to stabilise growth pic.twitter.com/LIgV6cd0DH
This chart highlights how China’s export growth took a tumble last month, with the worst decline in two years:
China’s economy will probably slow sharply this year, taking a bite out of global growth, reckons Neil Shearing of Capital Economics.
Both fiscal and monetary policy have been loosened over the past few months and this should start to feed through to the real economy by the second half of this year. However, the scale of the stimulus so far has been more limited than in 2015-16, and the effect on activity is likely to be correspondingly smaller.
All of this means that, while China’s economy isn’t facing an imminent collapse, neither is it in a particularly good place. Growth in 2019 is likely to be weaker than in 2018 and this will play a significant role in the coming global slowdown. We estimate that slower growth in China will shave about 0.2%-points off world GDP growth this year compared to 2018.
Another worrying sign for the economy of China as exports fell 4.4% year on year in December and even worse imports fell 7.6% as that hints at a domestic slowdown.
The money supply data in China confirmed the overall weakening trend seen in 2018 albeit a minor bounce was seen as M2 growth rose from 8% in November to 8.1% in December
European stock markets have all fallen in early trading, as China’s weak trade performance last month spooks investors.
In London the FTSE 100 has dipped by nearly 30 points, or 0.4%. Mining stocks are among the fallers, reflecting concerns that Chinese demand for iron ore, copper etc is fading.
Today’s trade data also shows that China’s soybean imports fell by 7.9% during 2018.
Ophir Gottleib of financial analyst group Capital Market Laboratories argues that its time for Washington and Beijing to end the trade war, before the situation worsens.
* China’s exports were *down* 4.4% year over year for Dec vs estimates of *up* 5.4% (@Selerity )
* China to U.S. current account balance largest in more than a decade for 2018.
Opinion: Trade War has a reason to end.
Copper and aluminium prices are falling today, as China’s weak trade figures spook the sector.
Stephen Innes of trading firm OANDA says:
The December trade figures are hammering commodity markets lower as this data drives home just how negative of an impact trade war is having on the Chinese economy, and perhaps the global economy too.
Investors are alarmed by the 4.4% tumble in China’s exports last month, says Naeem Aslam of Think Markets:
He fears Donald Trump’s trade war is bringing the Chinese economy to its knees.
The Chinese trade numbers released today got all the alarm bells ringing once again.
If you ever need any evidence that how the trade spat can impact the country’s economic health then this number is clearly a major factor here. The lower export number also means that lower jobs which means another direct impact on the economy.
What was that about trade wars being “good and easy to win”, Mr President?
Despite exports slumping in December, China’s overall trade surplus with the US for 2018 swelled to $323bn — the highest on record.
Exports to the U.S. rose 11.3% on-year in 2018, while imports from the U.S. to China rose a meagre 0.7% over the same period.
China’s overall trade surplus for 2018 was $351.76 billion, the government said. Exports in the whole of 2018 rose 9.9% from 2017 while imports grew 15.8% over the same period, official dollar-denominated data showed.
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
“This is not just due to the trade war and tariffs. On top of those, the major drag is slowing global demand.”
This morning’s numbers showed that far from improving the trade picture deteriorated further with exports declining 4.4%, as the global economic picture became more worrying. Much more concerning for an economy supposedly rebalancing away from big industry the import data slowed as well, reflecting a sharp slowdown in internal demand sliding 7.6%, missing expectations of a 4.5% rise.
Disappointment over this mornings data has seen Asia markets slip back and will see European markets open lower this morning.
Chinese trade slumped in December as trade war hit, though the picture for the whole of 2018 was rosier:
-exports rose by 9.9% in 2018 in dollar terms to $2.48 trillion
-imports surge 15.8%, leaving trade surplus of $351.8 billion https://t.co/2jFh8oyXkO
– UK Cabinet Ministers are reportedly exploring “Plan B” options with PM May expected to lose her Brexit vote on Jan 15