U.S. and China Both Show Surprise Economic Growth but Global Imports Remain Weak

Bloomberg reports that both the United States and China showed surprisingly strong expansions with their performance in the first quarter of 2019, although imports for the two powerhouses stayed weak. It meant that there was some limited growth flow experienced by major export nations Germany and South Korea.

The U.S. economy grew by an annualized 3.2 percent; while China’s gross domestic product (GDP) climbed 6.4 percent, with both performances higher than had been estimated. At the same time, manufacturing gauges in German remained weak, and South Korea had surprise shrinkage.

According to HSBC Holdings, the downturn in world trade is due to a cooling off effect from two key economic indicators: consumer spending and global investments.

Janet Henry, the chief economist for global affairs at HSBC, said that the two sectors that have hit a drag in recent times are the car industry and electronics. Combined, cars and electronics make up nearly 35 percent of South Korea’s manufacturing ecosystem. For Germany, car production accounts for 20 percent.

Henry added that these two sectors are not only experiencing tough times for the second year running but could face prolonged weakness for the long-term.

At the moment, the prevailing funk in world trade appears set to go on for the foreseeable future. There is no sign that it will abate, and global volumes have been falling at the pace last seen during the 2008 financial crisis.

HSBC points out that the weaknesses being observed regarding car demand on the international scene is a reflection of growing environmental concerns even as mandated institutions look to stringent policies to stem further damage.

The company also notes that the electronics sector might have seen the end of its bad days, though this sector of the economy will not see an upturn before 2020. Mobile phone makers are expected to release new 5G smartphones around this time, notes the London-based financial conglomerate.

The world’s leading export economies are thus likely to depend on domestic consumption to grow, but for most others, growth will likely hinge on whatever fiscal stimulus plans they have.