MORE CHINA WARNINGS
NTU readers got many earlier warnings (CHINA WATCH) but China is getting seriously weak.
FedEx’s CEO sounded a warning about the fate of China’s export-driven economy as the world’s largest air package shipper cut its forecast for global growth in 2012 and 2013.
Some China observers “completely underestimate” the impact of slowing exports despite the country’s domestic stimulus efforts, Mr. Smith said during a conference call with analysts after the company reported a slip in fiscal first-quarter profit.
Mr. Smith’s comments echo recent concerns expressed by other prominent executives. Andrew Liveris, chief executive of Dow Chemical Co., last week cautioned that destocking by Chinese clients was continuing, while small and medium-sized enterprises were suffering from a liquidity crunch. “They really are hurting, and bankruptcies are starting to occur,” said Mr. Liveris at an investor event. (…)
“We see the [U.S.] economy not improving from here,” FedEx Chief Financial Officer Alan Graf said Tuesday. He noted that its outlook for growth in U.S. gross domestic product next year has been given “a significant haircut“—to 1.9%, from an anticipated 2.4% just three months ago.(…)
The company lowered its full-year earnings view, now expecting between $6.20 and $6.60 a share, down from an already disappointing forecast of $6.90 to $7.40 in June. For its current quarter ending in November, FedEx forecast per-share earnings of between $1.30 and $1.45, below the consensus estimates of $1.67 from analysts surveyed by Thomson Reuters. (…)
I have occasionally posted China survey results from CEBM. Their latest gives little hope of a turn in coming months:
- Most surveyed steelmakers told us that they do not see actual demand recovery in downstream industries.
- Construction machinery dealers surveyed mentioned that sales in the first half of September were comparable to those in August. However, given that the historical average of M/M growth in September is above 20%, zero M/M growth means a very large Y/Y decline.
- Compared to August, 80% of cement producers surveyed reported that sales improved but that the recovery was weaker than the normal level in previous years, while 20% producers reported the sales did not change.
- Due to the shortage of capital, most responders reported that local governments’ infrastructure construction was slow, and that growth in new starts has not been observed.
China to face weaker external demand: MOC China is likely to grapple with weaker external demand during the rest of 2012 due to the slowing global economy.
“External demand in the next few months will be weaker than in the first half and the first eight months of the year,” Shen said at a regular press briefing.
China’s exports grew 2.7 percent year on year in August, up from 1 percent in the previous month but still below market expectations of 3 percent.
China’s FDI inflow falls for third month Foreign direct investment into China fell for the third consecutive month in August as global economic woes continued to weigh heavily.
The FDI the country drew last month dropped 1.43 percent from a year earlier to $8.33 billion, the Ministry of Commerce announced.
This brought the total FDI inflow for the first eight months of 2012 to $74.99 billion, down 3.4 percent year on year, said ministry spokesman Shen Danyang.
Hong Kong’s volume of goods exports down 5.1% in July The volume of total goods exports in Hong Kong fell 5.1 percent in July from a year ago, the city’s statistics department said Tuesday.
Euro-zone construction fell 0.3% on the month in July and 4.7% on the year, said Eurostat, the European statistical agency. In June, euro-zone construction decreased 0.6% on the month and 2.8% on the year. (…)
Italy’s construction activity dropped 2.2% in July from June and 14.2% from the same month of 2011.
Spain, which had a construction boom in the years before the onset of the global financial crisis beginning in 2007, saw a 2.1% decrease on the month and 16.1% on an annual basis.
The Bank of Japan took surprisingly strong steps to further ease its monetary policy, as it tries to tackle deflation, an export-sapping strong yen and the impact of slowing global growth.
The central bank’s policy board decided to increase the size of its asset-purchase program—its main tool for monetary easing with interest rates near zero—to ¥80 trillion ($1.01 trillion) from ¥70 trillion, and also to extend the deadline of the program by six months to the end of 2013.
The Bank of England looks set to step up its stimulus efforts again this year despite renewed concerns over inflation.
Rate-setters think the annual rate of inflation will take longer to fall to its 2% target than they thought last month because of rising commodity prices and an increase in companies’ labor costs, according to the minutes of the September meeting of the central bank’s Monetary Policy Committee, published Wednesday. Annual inflation was 2.5% in August.
(…) Yet they also record that some rate-setters “felt that additional stimulus was more likely than not to be needed in due course,” due to a “subdued and uncertain” outlook for growth.
IS THIS THE BIG DEAL?
Lower oil prices are absolutely necessary to any hope of a turnaround in Europe and the U.S.
Largest exporter worried about impact of high crude prices
Saudi Arabia has offered its main customers in the US, Europe and Asia extra oil supplies through the end of the year, a sign the world’s largest exporter is worried about the impact of rising prices on the global economy.
“The current price is too high,” a senior Gulf-based oil official told the Financial Times. “We would like to see oil prices back to $100 a barrel.” (…)
Saudi Arabia last launched a similar round of consultations with major oil refiners in March, weeks before it boosted its production to a 30-year high of 10m barrels a day. Riyadh is now evaluating the response from refiners.
The nation last month produced 9.9m b/d, but the senior official said that Riyadh was now again pumping around 10m b/d. “We are consulting our clients about their oil needs and telling them we are ready to supply more,” the senior official said.
Opec delegates said Riyadh was trying to bring prices down. “The Saudis are actively managing the market,” added another senior oil official from an African Opec nation. “They supplied a little less when prices dropped to $90 over the summer and they will supply more now that prices are above $115.” (…)
Oil prices dropped 25% last spring, causing a 13% decline in U.S. gasoline prices.