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Trade statistics confirm Brazil, China, slowdowns

Economic growth
By Paul Hodges on 09-Aug-2012

Brazil PE Aug12.pngEveryone is looking for clues as to how the market may develop during the second half of the year.

One way is to listen to governments. But they, unfortunately, have a tendency to paint a rosy picture, as their main aim is to keep themselves in power. In addition, the rush to produce early snapshots of GDP activity often leads to the need for major data revisions at a later date.

Another way is to follow the work of the high profile analysts in the investment banks. But they are also professional optimists, as they are in the business of selling the bank’s services to governments and companies. Thus very few of them forecast the downturn in Q4 2008.

A much more reliable way is to monitor trade statistics. This went out of fashion during the 1982-2007 supercycle, which saw constant growth. But today, it provides an immediate snapshot of developments. And thanks to the internet, data is available almost in real-time.

Anyone following China’s trade patterns for Polyethylene (PE) and PVC thus already knew by March that its economy was slowing much faster than generally realised. As the blog warned on 6 March, PE data “provided clear evidence that a slowdown is underway”.

Equally, they would have seen that demand was also slowing in those countries whose economies depend on China. Brazil is a good example. The chart above, based on data from Global Trade Information Services, confirms the turnaround in its fortunes over the past year:

• In H1 2011, net imports (green column) from NAFTA were 152kt versus 128kt in 2010 (blue)
• Imports from the Middle East, SEA and NEA were also growing
• Overall, Brazil’s import/export position was almost balanced

Today, however, these trends have all reversed:

• H1 2012 imports (red) from NAFTA fell to just 95kt
• Imports from the ME, SEA and NEA were also down
• Overall, Brazil has become a major exporter, with net volumes of 146kt

This data tells us virtually all we need to know about Brazil’s slowing economy. It also confirms that hopes of a major recovery in China remain wishful thinking for the moment.