New US Economy Means Weaker Export Growth for Asia

March 30, 2015

A recent study by the Hong Kong Monetary Authority shows that demand from the United States for Asian exports has grown at a slower pace during the past three years and will likely have a weaker impact on Asian trade in the future because of cheaper energy costs in the US, weaker prospects for growth in US consumer demand and a decline in US industrial offshoring to lower-cost production hubs. 

 

Export growth from emerging Asia has picked up recently but growth rates have been much slower than in previous years. In part, this reflects weakness in the European Union, which has still yet to fully recover from the effects of the global financial crisis. To a greater extent, slower export growth reflects weaker demand from the US.

 

Exports from Asian Economies, YoY Growth & Distribution, 2000-2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Source: Hong Kong Monetary Authority: Half-Yearly Report, March 2015

 

 

This is partly because the US is importing less energy than it did before. This is not a direct cause for fewer imports from Asia but it explains that, faster US growth does not mean faster import growth overall.  More specifically, consumer demand in the US is not growing at the same speed as in previous years, thus dampening demand for Asian goods.

 

In the report, the HKMA argue that consumer credit - a key support of US demand - has been growing at a much slower pace in recent years, due to a relatively subdued housing market and tightened controls on credit issuance.

 

Annual Change in US Household Debt (US$ Billions), Q1 2002 - Q3 2014 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Source: Hong Kong Monetary Authority: Half-Yearly Report, March 2015

 

US industrial companies are also slowing their overseas expansion and increasingly looking to produce their goods domestically. Before the financial crisis, many US companies outsourced or moved production to Asia; as such, US consumers bought imported, rather than domestically produced goods. With cheaper energy costs, rising wages in China and less risky business environments, US firms are increasingly looking at producing domestically, thus reducing overall demand for imported goods. 

 

Growth in US Consumption of Goods Produced Overseas by Industry: 2000-2007 vs. 2007-2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Source: Hong Kong Monetary Authority: Half-Yearly Report, March 2015

 

This all adds up to a different trading scenario for Asian exporters, with the US being less of a source of final demand than in previous years. To an extent, this might be offset in the future by increased demand from the European Union and from internal markets in the Asia-Pacific region. However, with the US still being the major source of global demand,  these trends hint at a slightly weaker world trade outlook for the coming years, despite an expected upturn in global economic growth. 

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