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Supply Lines: V stands for vaccine

Supply Lines

Asia has a warning for those expecting a V-shaped global economic recovery: Exports from the giant hub of manufacturing continue to slump.

Take the bellwether South Korea, where an export plunge has sent the economy into a recession. Early trade data this week show shipments heading for another monthly drop in July as global demand remains weak. The value of overseas shipments fell 13% in the first 20 days of the month from a year earlier. Exports to China, Korea's biggest overseas market, slid 0.8% while semiconductor shipments fell 1.7%.

While the pace of decline has eased from April and May, when shipments fell by almost a quarter, the ongoing weakness doesn't bode well as the deadly coronavirus continues to spread. The 20-day data is released ahead of most other trade reports, so it's closely watched as an early gauge of global economic activity.

It's a similar picture in Japan, where exports fell by more than 20% for a third straight month even as key markets started to reopen from virus shutdowns. The value of Japan's overall shipments overseas slid 26.2% in June from a year earlier, led by steep declines in exports of cars and auto parts.

Optimists pointed to car exports only halving in June compared with falls of around two-thirds in May. Overall drops in exports to the U.S. and the European Union were about 4-5 percentage points less than in the prior month. Shipments to China dropped just 0.2% compared with last year.

That demand from China may continue to improve, with a gauge this week showing sentiment in that nation's tech sector and among smaller firms increased this month, suggesting that the recovery in the second quarter continued in July.

Still, the overall picture in Asia remains subdued especially because the virus continues to flare in parts where it had been brought under control, including Tokyo and Hong Kong.

That's why the more bearish economists say the 'V' in any recovery stands for 'vaccine.'

Enda Curran in Hong Kong

Charted Territory

China's monthly wheat imports jumped to the highest in almost seven years in June as the world's largest consumer of the grain seeks to increase food supplies amid the coronavirus pandemic and take advantage of cheap global prices.

Today's Must Reads

  • Driving a wedge | U.S. Secretary of State Michael Pompeo urged India to lure global supply chains away from China, an attempt to deepen an economic wedge between the two neighbors as Washington and Beijing fight a diplomatic war for global supremacy.
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  • Try in 2021 | The U.K. accepts it is unlikely to secure a trade deal with the U.S. before November's presidential election, a setback for Boris Johnson's effort to secure an early win from leaving the EU.
  • Heavier metal | American steel producers have started to raise prices, with demand expected to rebound even as the industry faces uncertain prospects due to the coronavirus pandemic.
  • Greek revival | Greece is banking on the privatization of more regional ports to strengthen its status as a transport hub and help lift an economy reeling from the decade-long debt crisis and the fallout from the coronavirus.
  • Brush fire | Europe's largest paint maker suffered supply-chain disruptions heading into the pandemic and is still feeling some strains five months along as do-it-yourselfers stuck at home grabbed a brush for home improvements.
  • Stephanomics podcast | Host Stephanie Flanders speaks with HSBC economic adviser Stephen King and Adam Posen, president of the Peterson Institute for International Economics, for their thoughts on the fallout from the pandemic.

Save the Date

As the global economy begins to reopen, how can companies rethink how they produce their own products, from supply chains to adopting new technologies? On July 29, join Bloomberg Live for Powering Product Innovation in a Post-Pandemic World and hear from business leaders including Ellen J. Kullman, president & CEO of Carbon, and Thomas Ingenlath, chief design officer for Volvo Car Group, as they explain how they have pivoted and positioned themselves to respond to today's critical needs. Click here to register.

On the Bloomberg Terminal

  • ​​​​​​​Make a comeback | Retailers may regain up to a third of pre-pandemic sales by mainland Chinese tourists at Asia's top-three shopping destinations in 2021, with Japan leading South Korea and Hong Kong, Bloomberg Intelligence says.
  • One-two punch | The U.S. response to China's assertion of national security in Hong Kong threatens the city's jobs and loans more than trade, as the U.S. takes just 8% of its exports. Less trade may drag trade financing and manufacturing loan growth, while jobs in related sectors are a quarter of the workforce.
  • Use the AHOY function to track global commodities trade flows.
  • Click HERE for automated stories about supply chains.
  • See BNEF for BloombergNEF's analysis of clean energy, advanced transport, digital industry, innovative materials, and commodities.
  • Click VRUS on the terminal for news and data on the coronavirus and here for maps and charts.

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