Mixed news for three of Australia’s major export markets.
China’s June exports fell, but at a smaller rate, Japan’s producer prices fell sharply as deflation tightened its grip last month, but South Korea seems to be doing a bit better than previously thought.
Figures released late Friday showed that China’s export slump continued last month, but at a slower pace.
The country’s exports were off 21.4% in June from June 2008, the state-run Xinhua News Agency reported.
That’s better than the 26.4% fall in May and up 7.5% from the same month.
Imports dropped 13.2% after a 25.2% fall in May.
The figures suggest a June trade surplus of $US8.25 billion, the smallest in two years, excluding the first two months of each year, when the Chinese New Year holidays causes distortions.
The export figures will help support the confident assertion from China’s State Information Centre (SIC) late last week that the economy will meet the targeted growth rate of 8% this year.
The report said imports were predicted to shrink 16% and exports by 17.5% in 2009 compared with last year.
The annual trade surplus would reach US$220 billion, down from US$295.5 billion in 2008.
The centre said the government should focus on enhancing the implementation of the existing stimulus policies and cultivating new areas to boost economic growth.
China’s gross domestic product (GDP) growth was 9% in the third quarter last year then slumped to 6.8% in the fourth quarter and to 6.1% in the first quarter this year.
It is due to release its second-quarter GDP data on Thursday.
And China’s iron ore imports rose 3.4% last month to the second highest level this year.
Imports were 55.3 million tonnes, according to the country’s Customs Bureau.
That’s 3.4% more than the 53.5 million tonnes in May. Imports hit a record 57 million tonnes in April.
For the first six months, iron ore imports rose 29% to 297.2 million tonnes from the first half of 2008.
We reported Friday that China’s crude steel output reached 45.39 million tonnes last month.
That was 2.3% lower than the 46.46 million tonnes produced in May, which was the highest for 11 months.
The annual rate of output implied from the monthly figure was 552.2 million tonnes, more than 10% above 2008’s output of 500 million tonnes.
June’s figure was 1% less than the record 46.94 million tonnes set in June, 2008.
In Japan, producer prices shrank by a record amount in June as oil costs and the prices of other commodities (such as coal and iron ore) dropped.
The Bank of Japan said the fall of 6.6% in June from June 2008, was deeper than May’s contraction of 5.5%.
The report has reinforced concern that deflation is taking a stronger hold on the Japanese economy.
The year-on-year fall was the largest since the Bank of Japan started compiling the report in 1960.
Prices fell 0.3% in June from May, when they declined a revised 0.5%.
Consumer prices fell a record 1.1% in May from the same month last year
Economists warn that expectations for lower prices in coming months will prompt companies and consumers to delay purchases, further eroding profits and forcing firms to cut wages and other costs, or close down factories.
Much of the drop in wholesale prices has been a reflection of record oil costs in 2008, and declines may moderate in coming months because crude plunged in the second half of 2008, falling as low as $US32.40 a barrel in December from $US147.27 on July 1, 2008.
The annual rate of fall in producer prices is approaching the Bank of Japan’s forecast for a 7.5% fall in the year to March 2010. A further fall of 1.8% is forecast for 2011.
New estimates will be released on Wednesday after the central bank’s latest meeting this week.
Although oil prices are down from their peaks a year ago, they have risen by around 36% in 2009, further pressuring corporate cash flows and profits.
Meanwhile South Korea seems to be doing better with 2009 and 2010 economic growth estimates being upgraded off the back of government stimulus spending.
According to estimates from the Bank of Korea, the economy seems to have recorded its fastest quarterly growth for five and a half years in the second quarter, which helped power the upgrades.
The country’s central bank estimated second quarter growth at a rapid 2.3% on the March quarter when the economy grew by just 0.1%.
If confirmed when more accurate figures are released in the next month, it would be the fastest quarterly growth since the fourth quarter of 2003.
To be strictly accurate, the second quarter estimate also represented a 2.5% decline on the same quarter of 2008, but was stronger than expected.
As a result, the Bank of Korea has lifted its 2009 growth forecast to a contraction of 1.6%, up from the April forecast of 2.4%.
The 2010 forecast was lifted to 3.6% (3.5% previously): the IMF has said the country should grow around 3.1% next year.
The country is already reporting signs of a recovery, including export growth on a month-on-month basis and consumption rebounding, although corporate investment remains weak.
The government has just finished setting up a fund that will buy more than 60 cargo ships from South Korea’s major shipping companies to inject hundreds of millions of dollars into them. The ships will be leased.
The government has pledged more than $US 53 billion in spending measures with most of the new money allocated to be spent in the next few months.
The bank held its key interest steady at 2% last Thursday.
The Bank of Korea raised forecasts for gross domestic product this year and next because of the boost from interest rate cuts and government stimulus,
