U.S. and China Surprise With Economic Growth But Weak Imports

(Bloomberg) -- The U.S. and China both surprised with strong expansions in the first three months of 2019, yet their imports remained weak, meaning a limited growth cascade onto export powerhouses Germany and South Korea.

The American economy accelerated to an annualized 3.2 percent and China’s GDP rose 6.4 percent, both exceeding estimates. Yet in Germany manufacturing gauges remain weak, while Korea reported a surprise contraction. HSBC Holdings Plc attributes the world trade downturn to a cooling in global investment and consumer spending.

“Two sectors have fared particularly badly -- cars and electronics,” said Janet Henry, global chief economist at HSBC, noting they together account for about 35 percent of manufacturing in Korea and that vehicles are about 20 percent of German production. “Not only have these sectors been particularly depressed over the past year but their weakness threatens to be longer-lasting.”

The ongoing global trade funk shows little sign of abating, with volumes falling at the fastest pace since the depths of the 2008 financial crisis. The weakness in international car demand reflects increasing environmental concerns and more stringent policies. And while electronics might be through the worst of it, there’s little prospect of an upturn before 2020 when new 5G smartphones are rolled out, according to HSBC.

“With no strong broad-based investment recovery on the cards, overall import growth in the world’s major importers point to stabilization rather than a rapid revival,” Henry said. “For the world’s major export-oriented economies, the growth picture will hinge on their ability to drive domestic consumption, which in many countries will be helped along by a dose of fiscal stimulus.”

©2019 Bloomberg L.P.