Many media headlines mentioned weak Japanese exports data yesterday, but I found the details of the report more interesting than the headlines weakness. Not to beat a dead horse, but the magnitude of the Chinese slowdown seems to be gathering steam each month. For example, here is a chart courtesy of Markit Economics displaying the annual % change in Japanese exports to the U.S., Europe, and China:
What jumps out to me on this chart is the tremendous growth in exports to China throughout 2010 (partly due to the Chinese stimulus package, partly due to global growth recovering), in stark contrast to the past year, when exports to China have been down almost every month on a year over year basis. Exports to Europe have been especially weak in the summer of 2012, which is not as surprising given the state of affairs over there. Finally, the exports to the U.S. were much stronger in the spring of 2012, but that’s a distortion due to the Japanese earthquake in March 2011, after which the auto sector was affected by supply issues, hurting exports in 2011, and essentially boosting the yoy comparison in 2012.
This chart is another clear demonstration of the weakness in Chinese and European demand compared to 2010 and 2011. Our focus on the multinationals dependent on Chinese demand will continue going forward.