Supply Lines: Good, bad and ugly

Supply Lines

The latest trade figures from South Korea, Thailand, and Vietnam are underscoring how Asia's economic outlook can look good, bad and ugly all at once.

Each of the three nations saw an improvement in exports in the releases out in the past few days, while South Korea's and Thailand's were still in contraction. A bevy of risks still weigh on regional supply chains, with day-to-day developments in U.S.-China tensions, further virus outbreaks and their accompanying mobility restrictions and an uncertain U.S. electoral outlook all looming large.

For now, though, South Korea at least saw relatively good data. Trade figures Tuesday showed that the exports slump continued to ease in August, with the decline in the daily average for overseas shipments narrowing to 3.8%.

Combined with a revised second-quarter GDP figure that was slightly better than the initial estimate, as well as South Korea's best manufacturing PMI since February, the Asian export bellwether sent some positive signals of the global economy's healing.

There was less to celebrate in Thailand's improvement. Exports there

dropped 11.9% in July from the previous year, Bank of Thailand figures showed Monday. That's about half the contraction in each of the two prior months, though still a far cry from the five-year monthly average of 1.4% growth.

With Thailand's tourism industry cratering, services exports are especially slammed. That's left policy makers struggling to find other sources of economic growth — including the Thai deputy premier's pitch that hemp production is a fresh boost to revenue.

In Vietnam, one of the world's rare economies that could yet eke out growth in 2020, exports in August posted their best monthly performance since February. That helped to keep the year-to-date shipments growing over the same period in 2019.

It could be a tougher road ahead, though: Vietnam's PMI slipped further into contraction in August, suggesting factory managers are eyeing several trade risks with caution. And with a currency that the U.S. government is monitoring for deliberate undervaluation, things could get particularly complicated for Vietnamese policy makers as they navigate the U.S.-China trade war that was steering investment and demand in their direction.

Michelle Jamrisko in Singapore

Charted Territory

Sweden faces a milder recession this year than many economies in the euro area, yet its high exposure to international value chains is its Achilles heel. Exports crashed almost 20% in the second quarter as shipments of investment goods fell and lower net exports explain more than a third of the decline in quarterly gross domestic product, according to Bloomberg Economics. The flip side of this heavy reliance on exports is that a global recovery will also have a substantial positive impact.

Today's Must Reads

  • Phone tag | Apple asked suppliers to build at least 75 million 5G iPhones for later this year, roughly in line with last year's launch, in a sign that demand for the company's most important product is weathering the global pandemic.
  • Steel resolve | President Donald Trump is cutting the cap on allowable steel shipments from Brazil, citing a slump in the U.S. market. Meanwhile, Mexico is establishing a permit process starting Sept. 4 seeking to ensure it steel exports didn't originate in other countries.
  • Prime time | Walmart's answer to Amazon Prime finally has a launch date. The new subscription program, dubbed Walmart+, is set to be available on Sept. 15 at a cost of $98 a year.
  • Bouncing back | Global trade is on course to recover more quickly from the coronavirus crisis than after the 2008 financial crisis, according to Germany's Kiel Institute for the World Economy.
  • Meat market | Taiwan's government has finally yielded on a long-standing obstacle to a free-trade agreement with the U.S.: American pork and beef.
  • Fragile factories | Manufacturers in Asia continued to show gradual improvement, while those in Europe aren't getting carried away by the recent rebound in activity and are trying to save money wherever possible in case of another shock.
  • Plastic problem | Kenya must reject a bilateral trade deal with the U.S. as it includes proposals by a lobby group to expand the plastics industry's footprint across Africa, effectively reversing the country's ban on the use of plastic bags, Greenpeace said.

On the Bloomberg Terminal

  • Mind the gap | Higher labor costs or supply-chain disruptions in China may hurt Gap's sales and margins, given the company's reliance on vendors there, according to Bloomberg Intelligence.
  • Not immune | Bloomberg Economics forecasts the depth of recession among Sweden's most important trading partners means its export-market will contract sharply this year.
  • 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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