Chart of the Week: Taiwan manufacturing business surveys
Head of Macro Analysis
Summary: Our 'Macro Chartmania' series collects Macrobond data and focuses on a single chart chosen for its relevance.
Click here to download this week's full edition of Macro Chartmania.
Trade statistics for the month of April were horrific in all Asian countries. In the chart below, we have plotted Taiwan’s manufacturing business surveys released by Taiwan National Development Council. Manufacturing PMI, new orders and manufacturing production all have contracted in April. Manufacturing PMI was out at 47.6, new orders - which are usually considered as good leading indicators of Asian trade - collapsed at a low point this cycle of 37.1 and manufacturing production plunged at 40.2 – a new low that was not even reached during the 2015-16 Chinese turmoil.
Looking at preliminary data for the month of May, it all indicates that global trade downturn is likely to worsen in the short term. South Korea, which is the first country to report trade data in Asia, released terrible figures this morning. In the first ten days of May, which gives us a direction for the rest of the month, exports dropped minus 46.3% YoY and imports were down minus 37.2% YoY. The details of product and by region provide a gloomy picture of the global economy: semiconductor exports are out at minus 17.8%, auto exports at minus 80.4% and exports to China are at minus 29.4%.
Our worst fears are confirmed. The end of lockdown is not associated with a rebound in trade. Due to the hysteresis effect on global aggregate demand and the fact that many countries, notably in South-East Asia, are still battling against the virus, global trade is doomed to fall further in coming months before it gets better at the end of 2020. All the leading indicators that have been released lately, including today’s South Korea data but also Germany’s manufacturing PMI, are consistent with a sharp slump in world goods trade volume this year similar to that seen at the end of 2008. Our best case scenario is that global trade will decrease by a double digit in 2020, at minus 10% YoY.
The obvious bottom line is that global trade is still vulnerable to a second wave of the coronavirus, which is likely to materialize in the coming months in many countries, as it is currently the case in Germany and South Korea, and will force policymakers to put in place soft lockdown measures that will have negative impact on business.
Latest Market Insights
Q4 Outlook 2022: Winter is coming
- Winter is coming to the financial markets as central banks are tightening their grip. How spring will look is still a question.
European energy crisis: it will get worse before it gets betterThe winter in Europe will be tough, but whether the result is political chaos or sustainable, innovative solutions is still undecided.
A difficult and volatile quarter awaitsAs the year draws to an end, commodities continue to be at centre stage of the world with growth pockets political uncertainty.
The bright side: crises drive innovationThe positive spin on crises is that they come with solutions. It is worrisome that deglobalisation may be a response to this crisis.
Green transformation in China: renewable energy and beyondGoing green, China needs to span numerous energy sources to ensure stability, as every source comes with a challenge.
Asia: Intermittent solutions, but a faster renewable adoption curveAsian energy supply is being squeezed. This and the adoption of renewables may change the investment sentiment in the region.
FX: A Fed thaw needed to deliver a sustained USD turn lowerThe US Dollar can keep momentum when the Federal Reserve continues to tighten, leaving the rest to play to their drum.
Autumn can become ugly for equities and bond holders. Comfort for Dollar longsTechnical analysis suggests that equities could face a tough Q4 as could fixed income. US Dollar positions could provide some upside.
The next stock market sector to watch, with stocks going nuclearAs the world scrambles to find affordable, sustainable energy, nuclear is getting attention from politicians and investors alike.
The crypto space is getting cold when the hype disappearsCryptocurrencies face a winter of their own as retail investors and governments are asking tough questions.