The new week got off to a sour start on the data front, with yet another abysmal set of 1-20 day export numbers out of South Korea. This is just par for the course for a global economy still laboring under intractable trade uncertainty, but it’s worth mentioning for the extent to which it underscores the urgency of the situation.
In September, first 20-day shipments dove 22% from a year earlier on their way to a tenth consecutive monthly decline and things don’t look to have improved in October. Exports during the first 20 days of the month plunged 19.5% from last year, data out Monday revealed.
That puts the global demand bellwether on track for an eleventh consecutive month of declines. Exports to China dove 20% in the first 20 days of October, while shipments to the US, Europe and Japan fell 17.4%, 36.6% and 21.3%, respectively. Imports from Japan plunged more than 30%, amid the diplomatic row between Seoul and Tokyo.
Last week, the BoK cut rates for the second time in 2019. On Friday, Governor Lee told reporters in Washington that the Sino-US trade war has trimmed South Korea’s 2019 growth by 0.4ppt. The economy is set to expand at the slowest pace since the crisis.
As a reminder, South Korea is facing deflation for the first time ever amid the export slump. CPI flatlined in August, and a pushed below zero in September, something the BoK flagged ahead of time, but which is nevertheless disconcerting.
Meanwhile, Japan’s trade data looks lackluster. Exports fell 5.2% last month data out Monday showed. That compares to the 3.7% drop consensus was expecting. It was the tenth straight month of declines.
The IMF last week slashed its outlook for global growth this year to a new post-crisis low of 3%. To be clear, exactly nobody thinks the “Phase One” trade deal Donald Trump managed to cobble together from the ashes of the 100-page agreement he torched in May is going to be enough to save the cycle.
With monetary policy constrained, it’s fiscal stimulus or bust – with an emphasis on bust.