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June 25 2018

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June 25 2018 | The Journal of Commerce 29 www.joc.com Asia Trade: Midyear Review and Outlook Cover Story Special Report weakening of the dollar has helped as well, with the currency falling from its early-2017 levels, fueling demand in key US export markets. The value of China's renminbi against the US dollar has declined 8.9 percent from 6.9 renminbi per dollar in January 2017 to 6.3 in May, boding well for US exports to the nation's largest trading partner. The value of the dollar against the Japanese yen fell 3.8 percent over the same period to 109.3 per dollar. Japan is the No. 2 US export market. In another good sign for US exports, total US industrial pro- duction will increase 3.8 percent this year, up 1.6 percent from last year, according to IHS Markit's US Economic Outlook, which predicts manufacturing capacity utilization will rise to 75.9 percent from 74.8 percent in 2017. On the import front, US housing starts for both single family and multi- family units are expected to climb in 2018, after getting o to a slow start in a frigid fi rst quarter. Single family housing starts had their best year in a decade in 2017, and are forecast to increase 10.9 percent this year, as housing inventory declined year over year for 34 months through March, closing in on a record low. US housing construction fuels imports of everything from lumber, nails, and tools, to furniture, light- The growth combined with heavy fog in March and April to force the suspension of pilot services and clos- ing some port channels, undermining shipping schedules at the port of Shanghai and generating knock-on e ects at ports on the other side of the Pacifi c Ocean. That momentum appears poised to continue; China's manufactur- ing sector continued to expand in May, and the 12-month outlook for production improved, according to the Caixin China General Manufac- turing Purchasing Manager's Index, which clocked in at 51.1. Manufacturing sentiment in the United States was even more posi- tive, as IHS Markit's May Purchasing Manager's Index reported a "steep improvement" in business condi- tions that led to a PMI of 56.4 as new orders increased at the second-fast- est pace since September 2014. The EVEN WITH CHANGING US-China trade signs sending heads swiveling, overall trade between the United States and Asia is accelerating, and core economic fundamentals suggest continued growth for the coming year. US trade with Asia rose 3.8 percent in the fi rst quarter, led by a more than doubling in import growth to 8.9 percent, to 3.9 million TEU, according to PIERS, a sister product of The Journal of Commerce within IHS Markit. IHS Markit's Trends in the World Economy and Trade forecasts a 5.2 percent in- crease for 2018 to 25.6 million TEU in the trans-Pacifi c trade between Asia and North America. "The US economy has been growing for 107 months, its second-longest expansion since 1854 — 13 months away from tying the record. Given the largely solid current macroeconomic indicators, growth looks set to continue," IHS Markit Executive Director Patrick Newport and Senior Economist Manoo Sabety-Javid said in the most recent US Economic Outlook. Starting with the world's two largest economies, the United States and China, the outlook for con- tinued trade growth seems bright, assuming tensions between the two countries don't worsen. For example, US GDP is forecast to grow 2.8 percent for full-year 2018, up from 2017's 2.3 percent expansion, while China's GDP is expected to increase 6.7 percent, down slightly from 2017's 6.9 percent increase, according to IHS Markit forecasts. Lending credence to the growth forecasts, TEU volume at China's top 20 container ports rose 6.5 percent through April to 66.8 million TEU, according to fi gures from the Shang- hai Shipping Exchange. UPS expects Chinese container exporters to end the year up 5 percent to 10 perent compared to 2017. "The US economy has been growing for 107 months … Given the largely solid current macroeconomic indicators, growth looks set to continue." 1% 3% 5% 7% 9% 2014 2015 2016 2017 2018 (f) China US South Korea Japan China leads GDP growth among top US trading partners in Asia Source: IHS Markit Notes: f = forecast © 2018 IHS Markit Year-over-year change in gross domestic product US-China container trade is accelerating in spite of tari s and import bans By Dustin Braden

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