Japan appears to have re-coupled with the US with March export growth slowing sharply, reversing the solid rise in February on the back of good sales to China and booming India.
The small rise in the month was close to the slowest for three years.
Official figures from the Japanese Finance Ministry showed that exports rose 2.3% in March, well down on February’s 8.7% rise, which surprised the market.
Estimates from Bloomberg and Reuters had been for a slight slowing, but still solid growth of just over 6%.
Imports rose sharply, up 11.1% thanks to the higher price of oil and oil products. The country’s import bill will rise even further as coal and iron ore costs rise sharply after settlements with major suppliers in Australia, Brazil and other countries.
Iron ore prices will be up by at least 65% and coking coal by more than 200% for many buyers in the steel mills.
Economists say the slowing US economy exerted considerable pressure in the month with car sales particularly hurt. Japanese brokers say Toyota is likely to report a sharp fall in 2007-08 profits (for the year to March) and this week Nissan expressed concern at the damage the slowing level of demand from the US was doing to its outlook and that of the Japanese car industry.
Exports to the US fell for a seventh month in a row in March and the US slump was compounded by the impact of the higher yen.
Exports to China slowed sharply as well, a sign perhaps that the US recession’s impact is spreading through the region.
The figures make grim reading:
Exports to the US fell 11% in March from March 2007, the steepest decline since November 2003. Shipments to the European Union rose 3.6%, half the rate seen in February. Sales to China increased just 3.2% , and those to Asia just 1.9%
The sharp rise in the country’s import bill helped cut the trade surplus to a bit under $US11 billion in the month.
Exports to the US fell 11% in March from a year earlier, the steepest decline since November 2003. Shipments to the European Union climbed 3.6%, half the pace of the previous month. Sales to China increased 3.2%, and those to Asia rose 1.9% after a 13.8% rise in February. Exports to China had been up 14.8% in February, so the slowdown is particularly sharp.
Although there was a small improvement reported earlier in the week in consumer confidence in Japan, it’s likely that the central bank won’t signal a rate rise next week because of the rise in the value of commodity imports already seen, and expected to come.
The bank releases its first twice-yearly economic outlook next week (on April 30) and Tokyo reports say there’s an expectation that it will change tack to an approach based on the economy slowing, and inflation rising faster than previously believed.
The latter would normally be seen as creating pressure for a rate rise, but the economy looks more likely to be hit by the sharp rise in the cost of oil, food (Japanese Government wheat prices rose 30% at the start of this month, pushing up the price of noodles and bread) and metals and coal.
The outlook will describe the bank’s policy direction. It will also present board members’ forecasts for growth and inflation in the year ending March 2009 and the following 12 months.
The central bank is expected to cut its growth forecast from the 2.1% estimated last October and raise its projection for core-price increases from 0.4%. The bank signalled a changed forecast earlier in the month because of rising oil and raw-materials prices.
Meanwhile while we are worried about inflation at the consumer level climbing above 4%, Singapore has to wear a CPI of more than 6%, according to figures released yesterday.
It was the highest inflation rate for 26 years, according to Bloomberg and Reuters reports.
Figures from the country’s finance department: The 6.7% annual inflation rate (compared to a year earlier) was up from 6.5% in February.
Food prices, which make almost a quarter of the index, jumped 7.6% in March from a year ago, following February’s 6.7% annual rise.
The impact of higher oil and petrol prices was seen in the 7.9% rise in transport and communication costs in March, but down 0.2% from February. Housing costs climbed 8.1% in the month from a year earlier, down 0.7% from February.
While there were signs of moderation, the surge in rice prices to record levels in April, as well as oil, won’t ease the pressure.
Hong Kong and Malaysia also showed signs of rising inflation, although the true extent was held down by government subsidies.
