What's going on?
Chinese exports hit an all-time high in August, making all the highs and lows of the last couple of seasons totally worth it.
What does this mean?
A couple of things might be behind this surge in export demand, which grew 26% last month versus the same time in 2020. For one thing, the US and EU have had to bring forward their orders for the Christmas period to make sure they get everything in time, what with all the recent holdups in the shipping industry (we haven’t forgotten, Ever Given). And for another, China’s approach to controlling the virus has mostly kept its businesses operating, putting them in prime position to nab orders from countries that haven’t been doing so well. Heck, even outbreak-driven disruptions at China’s second-biggest port last month couldn’t stop the People’s Republic from delivering…
Why should I care?
For markets: China, your nerves are showing.
The strength of China’s exports has given its slowing economy some much-needed relief, but it mightn’t last. Chinese officials have warned that the rest of the year is seriously uncertain, with rival countries likely to steal back business and the coronavirus likely to return for a new wave. China might be hoping, then, that the financial support it’s just announced for small businesses – including lower-cost borrowing and subsidies for firms hit hardest by the pandemic – will be enough to get things back on track.
The bigger picture: A strange bedfellow.
It’s not just China at risk of an economic slowdown, with Goldman Sachs having lowered its US growth forecast on Monday. As for why the investment bank is concerned, take your pick: the relentless spread of the Delta variant, the chances that US government support will dry up, or the drop-off in the services sector’s recovery. Chin up, though: Goldman is expecting the country’s growth to pick back up in 2022.