Japan’s wholesale inflation rate rose to a 27-year high last month companies raised prices to counter record oil and commodity costs, the country’s trade balance narrowed; Singapore’s economy has slowed and the central bank in South Korea left its key rate steady at a seven year high…it was another mixed day economically from the fastest growing region of the world.
And China’s exports slowed in June in the first of a series of updates due over the next week on how the Chinese economy is travelling. Reports on inflation, industrial production for June and the first half of 2008 are expected, along with retail sales.
China’s Customers Bureau said overseas shipments rose 17.6% in June from the same month a year ago, down on the faster 28.1% growth rate of May.
China’s export growth in the first half was the slowest for five years; just 7% – down from sustained growth rates above 20% in the same half of 2007.
The June figure for this year for export growth was much slower than the 25%-plus rate in June of last year.
Economists said the slowdown reflected the appreciation of the Yuan, which has now risen 21% against the US dollar since being allowed to float (sort of) almost three years ago.
It also reflects the slowing demand from the US and Europe for Chinese goods. The Chinese authorities are allowing the currency to move higher more quickly to help put a lid on the surging cost of raw materials like oil, coal, iron ore and grains.
But this has come at a cost of slowing exports gains.
The Customs Bureau said this resulted in a sharp fall in the trade surplus which shrank 20% from June 2007 to last month when a surplus of $US21.4 billion was posted.
That was third monthly fall in a row and followed an acceleration in imports which rise 31% in June, compared to June last year. That was after a 40% jump in May.
The Yuan has gained 21 percent against the dollar since a fixed exchange rate was scrapped in 2005. It has risen 14 percent against the yen and fallen 7 percent versus the euro.
One of the more important statistics to be released in the next week or so (besides inflation) will be the quarterly growth figure and the figures for the first half of 2007.
China’s economy has slowed each quarter since hitting an annual growth rate of almost 12% in the middle quarters of Calendar 2007.
First quarter growth this year was 10.6% and the figure is expected to be a touch down on that rate when released next Thursday.
The slowing in China’s trade can be seen from the 21.9% annual rate for the June half, and the 30.6% growth rate in imports. That knocked 11.8% from the trade surplus for the June six months which still was an impressive $US 99 billion.
In Japan producer prices surged at an annual rate of 5.6% in June, compared to June 2007, up from the 4.85% revised rise in the year to May.
Higher prices for oil, wheat and soybeans, coal, iron ore, natural gas are driving the rise in costs for business: some have double din the past year: the Bank of Japan’s overseas commodity index is up 71% higher than it was in June of 2007.
The higher producer costs are feeding into consumer prices, and inflation excluding fresh food will probably exceed 2% within the next month or so, according to Tokyo economists. Core consumer inflation rant at 1.5% in May. Compared to Australia, (4.2% (Europe 4%) and the US (4%), Japan’s inflation doesn’t look to be a problem. But in the context of the Japanese’s economies long battle with deflation it is. The surge in steel and other costs are likely to have fed through into the prices of cars and other goods within the next month or so and that will produce consumer inflation at the core level (without fresh food or oil) compared to the 0.1% drop in prices in May.
Meanwhile the surging cost of oil and the slowing economic growth in its major markets has again squeezed Japan’s trade account.
For the third month in a row, Japan’s trade surplus shrank under the pressure of record oil prices pushed up the import bill and export growth slowed.
Imports rose 4%, compared with 13.4% in May and exports rose 4.2% compared to the 4.9% in the year to May.
The slowdown in the US and Europe has hit Singapore’s economy which yesterday reported the slowest growth in five years in the June quarter.
Gross Domestic Product rose by 1.9% in the June quarter, sharply slower than the 6.9% annual rate in the three months to March. The figure was much slower than forecasts from the market.
Surging fuel and food costs, which have pushed Singapore’s inflation to a 26-year high, have also left consumers with less to spend.
The Bank of Korea last week raised its 2008 inflation forecast to 4.8% from December’s prediction of 3.3%. Economic growth will slow to 4.6% this year from 5% in 2007.
Inflation hit an annual rate of 5.5% in May and yesterday the Bank of Korea left its key interest rate unchanged despite the sluggish economy and ailing trade performance.
In Malaysia the country’s central bank has warned that soaring food and energy prices may hurt household spending and restrain economic expansion in this year to below its March forecast of 6%.
New growth estimates for Malaysia will be released later this month.
Judging by Singapore’s experience, that’s highly possible.
Singapore’s Government still expects annual growth in 2008 of between 4% and 6%, so an up turn in this half is anticipated.
Manufacturing fell in the quarter from a year ago, compared to the 12.7% rise in the first quarter.
Trade figure
