The week begins with a big announcement regarding China’s ever-expanding exports. Later on, the US Federal Reserve will deliver its next interest rate and there will be a pre-Christmas update on UK growth.
China export expansion
China’s exports passed a titanic new milestone today as the country’s goods trade surplus topped US$1trn, according to new statistics from China’s customs administration.
The first 11 months of the year saw China post a surplus of $1.076trn, though this data does not account for services. Exports rose 5.9% year-on-year in November, while imports rose only 1.9%.
While exports to the US continued to fall despite a truce in the two nations’ tariff war, exports to other nations saw big rises. Exports to south east Asia rose 8% in this month’s release, with suggestions among some economists that this is an indicator of trans-shipments – moving Chinese-origin goods through other countries to avoid duties – to Western nations including the US.
Carlos Casanova, senior economist for Asia at UBP, told the FT that the US “hasn’t clamped down on trans-shipments of goods via third-party countries”, and that stable demand there remained the root of China’s surging exports.
Significantly, China’s exports to the EU rocketed in November too, growing 14.8% compared with an October increase of just 0.9%.
This is likely to prove a point of continued debate, not least after French President Emmanuel Macron called the continent’s trade imbalance with China “unbearable” after a meeting with Chinese leader Xi Jinping last week. Macron floated the idea of EU tariffs on Chinese goods.
Interest rates
The US Federal Reserve is expected to cut interest rates this week, with chair Jay Powell delivering his rate-setting announcement on Wednesday.
Current market movements suggest a cut is imminent, with oil prices at two-week highs today, though they could yet be affected by the prospects of peace in Ukraine and the possibility of a US conflict with Venezuela. Reuters reports LSEG data showing an 84% chance of a rate cut, which would be aimed at boosting both energy demand and US growth.
The meeting of the Federal Reserve’s board members is likely to include more differences of opinion than usual, with some said to favour a stable rate to deal with inflation and others looking to spur faster growth.
UK GDP estimate
The UK’s own growth rate while be back in focus this week, as the final GDP estimate figures are published ahead of the New Year.
The last round of data from the Office for National Statistics (ONS) indicated a growth rate of just 0.1% amid suggestions of a knock-on effect of the recent cyber attack that halted Jaguar Land Rover’s manufacturing operations.
UK exports to the US also fell to their lowest level in over three years last month, dropping 11.4%. This month’s numbers should provide some insight into the ongoing effect of tariffs on the UK’s goods exports.
PEM consultation
This week is the last week in which the government is accepting submissions to its call for evidence on the Pan-Euro Mediterranean Convention on Rules of Origin (PEM).
The Department for Business and Trade (DBT) has invited businesses and partners to share their views on the “opportunities and risks” of acceding to PEM. It said:
“We are interested in the views and experiences of businesses across all sectors, sizes and regions that participate in the trade of goods, particularly in the trade of goods with PEM members. Stakeholders from within and outside of the UK are invited to respond.”
The Chartered Institute of Export & International Trade is issuing its own response, though some questions posed by the consultation differ between business associations and businesses, so some members may wish to respond individually. They can do so here.
Elsewhere in the headlines
· The UK government has promised 50,000 new apprenticeships in a move aimed at curbing youth unemployment
· A ‘buy European’ push in the EU could affect UK exports – and UK ministers are pushing Brussels to include the country in its economic plans, according to The i Paper
· Ukraine-US talks on the possibility of peace continue this week, though US President Donald Trump has begun it by suggesting Ukrainian leader Volodymyr Zelensky has yet to read the latest US draft of a peace plan
Other dates for the diary
Monday: Japan GDP estimate published
Tuesday: Chancellor Rachel Reeves faces parliamentary questions
Wednesday: Australia implements social media ban for under-16s
Thursday: General strike in Portugal
Friday: Economic and Financial Affairs Council (Ecofin) meeting of EU finance ministers
Saturday: Dick van Dyke’s 100th birthday
Sunday: Presidential election runoff in Chile
