U.S.-Asia Decoupling Seen in Export Weakness: Chart of the Day

Asian nations aren’t getting the bounce that a U.S. manufacturing recovery used to bring, reflecting a weakening link between demand in the world’s largest economy and regional exporters, said Deutsche Bank AG.

The CHART OF THE DAY tracks the widening gap between U.S. manufacturing performance and export growth in the largest economies of north and Southeast Asia. A purchasing managers’ index for the U.S. by the Institute for Supply Management has risen in all but two months in 2014, climbing in August to the highest in more than three years. By contrast, year-on-year growth in Japan’s overseas sales weakened to 3.9 percent in July from 15.3 percent in December, while South Korean shipments declined in August, according to data compiled from each government.

Although China saw a 14.5 percent jump in July shipments, growth probably decelerated to 9 percent in August, according to a Bloomberg survey. Among Southeast Asia’s biggest economies, exports from Indonesia and Thailand fell in five out of seven months. The chart shows the most-recently available period and also the month at the end of each quarter starting with December 2004.

“The new disconnect between U.S. demand and Asian exports seems to be firm,” said Taimur Baig, director of Asia economics in Singapore at Deutsche Bank. “Global trade growth has been anemic in the aftermath of the global financial crisis. While Asia’s share of global trade has continued to rise, the stagnant trade environment suggests little scope for vigorous exports growth.”

A renaissance in U.S. manufacturing is reducing demand for imports while rising trade restrictions by the Group of 20 countries are threatening Asian exporters, according to Baig. Automotive exports from Japan and South Korea will probably decline in the coming years as more manufacturers use Mexico as their production base to serve the U.S. market, he said.

The divide between Asian exports and U.S. manufacturing underscores the need to diversify markets and boost domestic demand, said Wai Ho Leong, a Singapore-based economist at Barclays Plc. Last year, China was the top export destination for Malaysia, Thailand, Indonesia, the Philippines, South Korea and Japan, data compiled by Bloomberg shows. Indonesia’s central bank has refrained from raising interest rates this year after tightening policy in 2013, while Thailand and South Korea have cut borrowing costs to support their domestic economies.

Before it's here, it's on the Bloomberg Terminal.