Demand for emerging market exports has hit a new post-crisis low, with US imports from China dropping sharply in July in the latest sign that the engine of growth for the world’s developing economies is sputtering.
The US has been one of the bright spots in an otherwise gloomy global economy and one of the few sources of growth for emerging market exporters, which last year saw exports of goods and services fall for the first time since the global financial crisis, according to figures from the UN.
Data from the US Federal Reserve show that US merchandise imports from China, the vast majority of which are manufactured goods, have been contracting in value terms since March and in volume terms since April.
Elissa Braunstein, an economist at the UN Conference on Trade and Development (Unctad), said the drop in imports was puzzling due to reports of a recovery in US demand and the strong dollar, which should make imports cheaper and boost demand.
“This is extraordinary,” she said. “It is going to be much harder in future [for emerging market exporters]. If exports are going to deliver the growth they promised you really need external demand.”
The downturn in US demand was particularly sharp in July, when imports from China fell 3.5 per cent in value and 1.6 per cent in volume on a rolling 12-month basis, according to the Fed data.
In value terms, US imports from emerging markets as a whole excluding China have been declining since January 2013, according to data from the International Monetary Fund, largely explained by falling prices for oil and other commodities and the strength of the dollar.
It is a similar story in the EU, the emerging world’s other main source of export demand, although European imports from EMs returned to growth in 2014 before contracting again last year.
“This is a real worry,” said Simon Evenett, head of the independent Global Trade Alert, which monitors international trade policy. “Most people’s explanation for slowing global trade is that it’s due to China sucking in less imports. But [the US data] point to flat or falling imports in the industrialised countries. The US is in more trouble than people realise.”
He said recent data showing a weaker than expected factory sector in the US added to concerns that the woes of US manufacturing may be spreading to emerging markets through the channel of trade.
“The dynamics of manufacturing in the global economy may be suffering from macro changes such as a shift to services,” he said.
This shift became clear this year when Unctad reported that in 2015, for the first time since records began, services accounted for a bigger share of the growth in global trade than goods.
However, the shift is unlikely to provide much relief for emerging economies looking for a new growth model, as the benefits of services growth fall mainly in the developed world.
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