Reasons to be Mostly Cheerful

• NE Asia's Exports Remain Robust
• G3 Imports Have Not Collapsed
• China's Exports are Flagging for Structural, not Cyclical, Reasons
• Global Domestic Demand Retains Momentum
• NE Asian Demand is as Big a Drag as European Demand

Back in December, when Europe's finest were last bewailing that their jerry-built Euro project could plunge the world into a 1930s-style Great Depression, world trade data showed that "so far not only is the slowdown nothing like what happened at the end of 2008, but it's less dramatic even than the slowdown which accompanied the near-recession of 2000-2001.''

And it's still true: the world trade environment remains in decent health despite the disaster being engineered in Southern Europe. In the three months to February, imports by G3 nations rose 7.4% YoY, and in the three months to March, NE Asia's exports rose by 4.4%. In 6m momentum terms, G3 imports are losing sequential momentum negligibly, whilst NE Asia's is slightly positive. 

Over the last couple of days, we've had trade data which pushes the argument further.  March trade data from the US came in remarkably strongly today, with imports up 5.2% mom and exports up 2.9% mom. We've had surprisingly strong March trade data from Germany, too, showing exports up 0.9% mom, and imports up 1.2% mom (and let's not forget – Germany's imports comprise nearly 52% of the Eurozone total). But we've also had  shockingly bad April numbers from China: exports up just 4.9% yoy and imports virtually static (up 0.3% yoy).

Here are five things the data is telling us. 

First, NE Asia's exports remain robust – there's still no repeat of 2001, let along 2009, showing up in either YoY or momentum terms.  

Second, the reason why NE Asian exports remain relatively buoyant is that G3 imports have slowed only mildly. This has been achieved because a surprisingly mild slowdown in European and Japanese demand has been countered by a robust demand from the US.

Third, China's export-problem continues. I have argued for some time (in detail, here) that since 2009 China's extraordinary top-line export numbers disguise a deeper failure – one in which ever-more expensive investment efforts have yielded ever-decreasing gains in market share. We should expect that trend to become more obvious this year, simply because this year Japan's export-sector isn't crippled by  supply-side disruptions. In fact, so far this year, Japan is no longer losing market share of NE Asia exports at all.

Fourth, right now the slowdown in NE Asia is as big a problem for world trade as the Eurozone's problems.

Well, you aren't going to read it in the newspapers but it's there in at least three sets of data. First, the details of China's 1.5% mom fall in exports during April, which show that  exports to the EU rose 0.2% mom, and exports to the US fall a relatively mild 1.7%. What killed China's numbers in April were exports to Asia: to Japan they fell 5.9% mom, to Korea 6% mom, to Taiwan 5.9%!

Second, if our horrified attention is fixed on Southern Europe it is difficult to hold in mind the fact that Germany accounts for around 52% of total Eurozone imports. Greece is spectacular, but so too, in the opposite way, is Germany's importing track record so far this year: up 2.4% mom sa in January, up 3.6% in February, up 1.2% in March.

Third, I directly track changes in momentum in domestic demand in the US, in NE Asia and in Europe (taking Germany, France and UK as the major economies). When taken as a GDP-weighted aggregate, it tells the same story as our trade data – the world economy is not falling off a cliff. I shall go into more detail about this next week.

When you strip out the momentum changes in the various regions, the geographic pattern is surprising: the US is once again leading the world economy, the major economies of Europe have just about reversed the loss of momentum seen during the second half of last year, and NE Asia's economies are not doing much more than marking time.