Aurelia Butler

In 2020 and 2021, when the coronavirus pandemic forced much of the world’s population to spend more time at home, Chinese exports of laptops recorded double-digit percentage growth.The boom was one example of how China’s economy benefited from shifting global demand as governments around the world imposed Covid-19 restrictions, crippling spending on restaurants, travel and other services and encouraging purchases of goods.But this year, China’s shipments of laptops have slumped 16 per cent year on year, reflecting a trend of weakening growth in its exports, which may now even be on course to decline.Amid the easing of Covid measures around the world and supply chain disruption from domestic lockdowns, Chinese exports grew just3.9 per cent in April in dollar terms. It was their weakest level since July 2020.The trend is part of a sweeping reversal of fortunes for China’s wider economy, which bounced back from the initial shock of the pandemic to outperform the rest of the world in 2020 but is now grappling with the lockdowns in Shanghai and other cities and a property sector crisis.China has set a 5.5 per cent target for GDP expansion this year, the lowest in three decades, but Premier Li Keqiang told officials last week it could struggle to achieve positive growth at all in the current quarter.“Given the big shock the economy’s just been through plus the headwinds on the export side, I think it’s quite challenging just to get positive growth at all this year,” said Julian Evans-Pritchard, China economist at Capital Economics who expects “quite a significant outright decline in export volumes”.Evans-Pritchard estimated that exports accounted for almost half of China’s 18.3 per cent year-on-year gross domestic product expansion in the first quarter of 2021, but expected it to make a negative contribution to growth from the third quarter of this year onwards.

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The export slowdown has removed a source of support for the economy that Chinese policymakers have relied on throughout the pandemic. It has also come just as zero-Covid policies are causing rising unemployment and a collapse of activity in many cities.“Reopening [globally] is not good for China’s exports,” says Ting Lu, chief China economist at Nomura.Lu estimated that about 80mn people worked in China’s export sector in 2020, meaning a single percentage point decline in its activity could hit hundreds of thousands of jobs.Chinese trade data hint at changing global consumption trends over the past year. Exports of textile yarn and fabric products, including face masks, were up by just 0.9 per cent year on year in April, compared with 22 per cent growth in the same month of 2021. Lu said exports of electronic products associated with homeworking fell 5 per cent in April, compared with a 10 per cent rise in March.

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Meanwhile, from January to April this year, furniture exports rose just 2 per cent, after soaring 70 per cent in the same period of 2021.Data from other major economies also point to shifting consumer behaviour. In the UK in March last year, real output in the recreation and entertainment sectors was still down by a quarter against a year earlier, while accommodation and food services were down 62 per cent, according to data from the Office for National Statistics.However, by March this year, both sectors had rebounded to pre-pandemic levels following the easing of Covid restrictions.Similarly in the eurozone, inflation-adjusted retail sales, which mainly reflect purchases of goods rather than services, peaked at 6 per cent above pre-pandemic levels in November last year and have fallen since.

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Data on spending on services is not available for the eurozone as a whole, but Eurostat data for certain countries point to a pivot in spending from goods to services. In Italy, spending on restaurants and hotels grew by an annual rate of 23 per cent in value terms last year, nearly 6 times faster than spending on food and non-alcoholic beverages.Lockdowns in Shanghai and other Chinese cities have caused serious supply chain problems for exporters. But Louis Kuijs, chief Asia economist at S&P Global Ratings, said export challenges were not limited to China. “After the huge bounce in exports [in] much of 2020 [and] 2021, we should expect to see global demand slowing this year,” he said. “That’s true for China, it’s also true for other countries — the other exporting powerhouses like Taiwan and South Korea are facing the same problem.”Meanwhile, the global backdrop of higher inflation might have masked the extent of the hit to Chinese exports, Kuijs said.

“If you look at export numbers in US dollar terms they are still quite good, but a large part of that is price increases,” he said. Lu at Nomura said the lockdowns in Shanghai and other cities would put Chinese suppliers at a disadvantage to international rivals.“Manufacturing in other parts of the world will return to normal, so China’s exports will be faced with more competition,” Lu said, adding that the restrictions would prompt buyers of Chinese exports to shift some orders elsewhere. “I don’t know the scale, but I believe it’s happening.” More

WASHINGTON (Reuters) – President Joe Biden is planning a media blitz to lift his sagging opinion poll numbers before November’s congressional election, promoting his management of America’s recovery from the coronavirus pandemic and efforts to cool spiraling inflation.Biden’s meeting with Federal Reserve chair Jerome Powell to discuss inflation on Tuesday was the first event in a multi-week agenda, a White House official said.Through June, the official said, the White House plans to emphasize the historic levels of job creation and low unemployment rate seen through Biden’s first 17 months in office, his pledge to respect the Fed’s independence and coming efforts to “put more money in the pockets of working families.” Biden will speak on the jobs numbers on Friday, and Cabinet members including Treasury Secretary Janet Yellen, Commerce Secretary Gina Raimondo and economic advisers Jared Bernstein and Heather Boushey plan dozens of television spots and other in-person events. The prospects for Biden’s Democratic Party to maintain control of Congress in the Nov. 8 election may hinge on how successfully he can craft a positive economic narrative around what has become an increasingly sour mood.On the surface, working families have been doing well. Unemployment is at levels more akin to the boom years of the 1950s and 1960s, wages for many lower-skilled occupations are rising, and bank accounts, on average, are still flush with cash from coronavirus support programs. Recent Fed reports and surveys reported households on average in a strong financial position.But confidence has waned, and in a recent Reuters/Ipsos poll the economy topped respondents’ list of concerns. Biden’s approval rating has fallen to 36%, the lowest of his presidency.Inflation has hit a 40-year high, persisted longer than policymakers expected when it first rose last year, and in recent months has prompted the Fed to unleash what may prove one of its fastest ever efforts to tighten monetary policy.The opposition Republican Party, enmeshed in a civil war over former President Donald Trump’s 2020 election falsehoods, has united around hammering Biden on inflation.”What the Democrats have to do is resist the urge to explain how inflation got caused and just go completely into like, here’s what we’re gonna do about this,” said Rodd McLeod, a Democratic political consultant in Arizona, a state that can swing toward either major party.Responses to a commentary that Biden wrote about his inflation-fighting plans in the Wall Street Journal Tuesday underscored the size of the challenge he faces.By mid-day, the vast majority of more than 1,000 comments in one of the country’s few national newspapers dismissed the prescription drug pricing and clean tax credit plans Biden laid out, while advocating instead for lower taxes and more oil drilling and dismissing Biden’s ideas as fiction.Taming inflation will require not only adept central bank decision-making, but no small degree of luck. Global prices are buffeted by such events as the Ukraine war and the coronavirus pandemic, and whether another surge could tamp down China manufacturing again.The best case for Biden at home is that tighter Fed monetary policy slows the economy just enough that spending cools, and companies cut back on job openings without actually cutting into jobs. The alternative, should the Fed find inflation more persistent, is for the central bank to move interest rates so high the economy tips into recession with a significant rise in unemployment. September is expected to be a pivotal month, with the Fed expected to take stock and decide whether to become even more aggressive. More

SEOUL (Reuters) – South Korea’s exports grew at a faster pace in May than a month earlier as a rise in shipments to Europe and United States more than offset disruptions to trade with China from its strict COVID restrictions.Exports rose 21.3% from a year earlier to $61.52 billion, trade ministry data showed on Wednesday, beating the forecast for 19.3% growth in a Reuters poll and well ahead of a 12.9% rise in April.South Korea’s monthly trade data, the first to be released among major exporting economies, is considered a bellwether for global trade.Shipments to the United States jumped 29.2% from a year earlier, above than April’s 26.6%, while exports to the European Union gained 23.5%.Lockdowns in China have snarled logistics and supply chains, hammering trade in the region.Exports to China grew just 1.2% in May from a year earlier after declining 3.4% in April. Imports, meanwhile, jumped 32.0% to $63.22 billion. That brought the trade balance to a $1.71 billion deficit, after logging a $2.51 billion deficit in April.”May this year had more working days compared to last year. Exports to the U.S. and Europe continue to be strong, although China-bound exports and shipments to Hong Kong remain weak amid their COVID policies,” said Park Sang-hyun, an analyst at HI Investment & Securities.”Going forward, the biggest risk to South Korea’s exports cycle would be China.”Wednesday’s trade data comes as the Bank of Korea delivered back-to-back interest rate hikes last week to bring consumer inflation down from 13-year highs.The central bank also downgraded the country’s growth forecast for this year to 2.7% from an earlier forecast of 3.0%, as it sees slower global demand hurting South Korea exports in the second half. More

WASHINGTON (Reuters) -U.S. Treasury Secretary Janet Yellen said on Tuesday that she was wrong in the past about the path inflation would take, but said taming price hikes is President Joe Biden’s top priority and he supports the Federal Reserve’s actions to achieve that.Asked in a CNN interview whether she was wrong to downplay the threat that inflation posed in public statements over the past year, Yellen said: “I think I was wrong then about the path that inflation would take.””As I mentioned, there have been unanticipated and large shocks to the economy that have boosted energy and food prices and supply bottlenecks that have affected our economy badly that I didn’t at the time fully understand,” Yellen said, adding that the shocks range from Russia’s invasion of Ukraine to recent COVID-19 lockdowns in China.”So really, the shocks to the economy have continued, but inflation is the number one concern for President Biden,” Yellen said.Biden “believes strongly and is supportive of the independence of the Fed to take the steps that are necessary” to reduce inflation, Yellen added.Biden met earlier on Tuesday with Fed Chair Jerome Powell and underscored that he “respects the independence of the Federal Reserve,” a White House official said.Yellen said the Biden administration was taking action to try to supplement the Fed’s effort by reducing the cost of prescription drugs and health care and by pushing proposals in Congress to boost the use of renewable energy.While she said a recent decline in core inflation data was encouraging, she noted that oil prices remained high and Europe was working on a plan to ban imports of Russian oil. “We can’t rule out further shocks,” Yellen said. More

SYDNEY (Reuters) – Australian home prices broke a 20-month winning streak in May as falls accelerated in Sydney and Melbourne amid rising interest rates and a cost-of-living crunch.Figures from property consultant CoreLogic out on Wednesday showed prices nationally slipped 0.1% in May, dragged down by a 0.3% drop in the major capital cities. While annual growth slowed, it was still solid at 14.1% reflecting the huge gains enjoyed over 2021.Values in Sydney dropped a steep 1.0% in May, while Melbourne fell 0.7%. Sydney prices are down 1.5% from their January peak but still up 23% on pre-pandemic levels.Most other cities fared better with Brisbane rising 0.8% in May, Adelaide 1.8% and Perth 0.6%.The regions continued to benefit from a shift to country living and greater space, and prices rose 0.5% in May to be 22.1% higher than a year ago.Weakness in the highly priced Sydney and Melbourne markets in part reflected the Reserve Bank of Australia’s (RBA) move to raise interest rates in early May, the first hike in 11 years.”Housing has been getting more unaffordable, households have become increasingly sensitive to higher interest rates as debt levels increased, savings have reduced and lending conditions have tightened,” said CoreLogic’s research director, Tim Lawless.”Now we are also seeing high inflation and a higher cost of debt flowing through to less housing demand.”Supply was turning buyers’ way with listings rising to above average levels in Sydney and Melbourne, while clearance rates at auctions have steadily declined.Demand had also come off the boil with home sales in Sydney down 33% in the three months to May from the same period a year earlier, while Melbourne was off 21%.A sustained drop in prices would be a drag on consumer wealth given the notional value of Australia’s 10.8 million homes is put at A$9.9 trillion ($7.11 trillion).($1 = 1.3924 Australian dollars) More

(Reuters) -Salesforce Inc raised its full-year adjusted profit forecast and said it did not see any material impact from the uncertain broader economic environment, sending the enterprise software firm’s shares up about 8% in extended trading.The company said on Tuesday there was strong demand for its software from companies looking to improve efficiencies and incorporate modern-day work-flows, including hybrid work, despite a four-decade high inflation and tapering consumer demand.Shares of the San-Francisco-based company rose 7.7% to $172.50, after plummeting about 37% this year as investors moved out of growth stocks on a series of bad news including high inflation in the United States and the Ukraine crisis.Shares of rivals Oracle Corp (NYSE:ORCL) and Microsoft Corp (NASDAQ:MSFT), which have also forecast an upbeat year, have fallen between 18% and 19% this year.”Macroeconomic or geopolitical headwinds may show up sooner or later, but Salesforce (NYSE:CRM) is well positioned to capitalize on enterprise spending on digital transformation, and the company has a fairly resilient model,” SMBC Nikko Securities analyst Steven Koenig said.Salesforce increased its adjusted profit estimate for the fiscal year ending January 2023 to $4.75 per share from its prior forecast of $4.63.The profit forecast raise is a big positive as it’s a key area of investor focus, especially in the current market environment, said William Blair & Company analyst Arjun Bhatia.However, foreign exchange headwinds forced the company to marginally lower its revenue forecast for the year to $31.7 billion to $31.8 billion, from its earlier forecast of $32 billion to $32.1 billion.Revenue in the first quarter ending April 30 rose 24% to $7.41 billion from a year earlier, above analysts’ average estimate of $7.38 billion, according to IBES data from Refinitiv.Net income fell to $28 million from $469 million. More