Weekly Export Risk Outlook


​In the headlines:
- Japan: BoJ policy statement and GDP revision
- US: Policy signals
- China: Still moderate growth
- Austria: Stagnation

Figure of the week: +1% - Japan's revised Q/Q Q1 GDP growth

Japan: BoJ policy statement and GDP revision

In its latest monthly statement, the Bank of Japan (BoJ, central bank) pledged to pursue both quantitative and qualitative monetary easing until its inflation target of 2% is achieved. According to the BoJ, the monetary base will increase at an annual pace of JPY60-70 trillion and the target for asset purchases remains unchanged. Also included in the statement is the latest economic outlook, with the BoJ now more confident about growth in the short term. Q1 GDP data have been revised upwards, with growth now put at +1% q/q from an earlier projection of +0.9%. EH expects GDP growth to accelerate to +1.6% in 2013 (and to remain relatively stable at +1.4% in 2014), driven by stronger domestic demand, especially public expenditure. However, excessive public debt is likely to remain a drag on growth.

US: Policy signals

May’s employment report was lacklustre. Although job growth of 175,000 slightly exceeded expectations, data for the previous two months were revised down 12,000, unemployment ticked back up 0.1pps to 7.6% and both hourly earnings and weekly hours worked were unchanged. The Fed needs to see the labour market “improved substantially” before it starts to taper its programme of quantitative easing (QE) and there is widespread speculation that this could occur at the September meeting. However, there are only three more employment reports before then and it is unlikely that these will all be very strong, so it appears more likely that the tapering will not begin until later in the year, at the earliest. Moreover, the ISM non-manufacturing report, although mostly positive, showed employment falling from 52 to 50.1—barely in expansionary territory.

China: Still moderate growth

A raft of economic data for May released last weekend continued to point to at best moderate growth, with risks tilted to the downside. Industrial production was up +9.2% y/y, slightly down on April’s +9.3%, led by light industry. Fixed asset investment in January-May increased +20.4% y/y, slightly down on January-April and slightly below 2012. Retail sales growth continued to improve slightly, however, up +12.9% y/y. Both exports (+1% y/y) and imports (-0.3%) weakened markedly, but monthly data has been erratic, clouded by possible over-invoicing and, in May, base effects. The trade balance remained in surplus. Credit expansion also slowed, although it has been strong so far in 2013. Inflation (CPI) eased to 2.1% (2.4% in April)—against expectations. Overall, growth expectations are being revised downwards. EH now forecasts +7.7% in 2013 with the risks to the downside.

Austria: Stagnation

GDP stagnated in Q1, following a contraction of -0.1% q/q in Q4 2012. Positive contributions were provided exclusively by public spending, growing by +0.5% after +0.2% in the previous quarter. Despite a moderate increase in foreign trade, with exports and imports both rising by +0.3%, the net export balance did not provide support for growth (contributing 0.0pps). While consumer spending remained flat (0%) for the fifth consecutive quarter, investment spending continued to fall, with investment in machinery and equipment contracting by -1% and construction spending down by -0.1%.