Trade Talk Stakes Rise as the Data Darken

Date: Monday, February 11, 2019
Source: Bloomburg

A Trump-Xi meeting ahead of the March 1 deadline is now off the table, diminishing hopes for a breakthrough by then. As the world awaits the outcome of a new round of talks in Beijing mid-February, trade data keeps worsening.

German business expectations took a downturn in January, dropping to a more than six-year low, while the China new exports index stayed in contraction and lingers at the bottom of its normal range. The declines are likely the outcome of purchasing managers holding off on orders in hopes for a resolution from the now-postponed Trump-Xi meeting. The only indicators still in healthy range are those measuring Port of Los Angeles cargo and Singapore throughput—two of the busiest ports in the world. Those cheery readings probably won’t last long as the boost from tariff front-loading and Chinese New Year irregularities will soon fade.

We’ve selected measures across shipping, sentiment and export volumes to watch for signs of stress amid the tensions. For the clearest indication, we measured how far each gauge is from historic norms.

In addition to the 10 primary gauges, four price indicators provide another valuable glimpse into the global trade landscape, albeit sometimes in reverse: an increase in prices can be a sign of trouble, while above-normal scores bode well in the other categories. Higher tariffs are probably to blame for an unfavorable increase in Chinese electronics prices, while stable demand may be helping the other price indicators stay in normal range.

 

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