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June 25, 2015

Asian Countries Hurt By Weak U.S. Demand

Asian exporters are finding it harder to sell to the U.S., causing many nations to look for alternative markets of goods-hungry consumers.

Export-focused nations such as China, Thailand, and South Korea are suffering from years of declining demand in the United States. With savings rates at historic highs and American consumers choosing to spend less, exporters are finding it difficult to sell as much to Americans as they did in the past. One economist at an investment bank based in Hong Kong warned that Asia’s economic growth “is going to be capped” because of Americans’ lower consumption habits, unless Asians find an alternative market in which to sell.

This has caused many Asian countries to seek alternative engines for growth. In China, the government is attempting to shift consumption towards housing and the local consumer. In Thailand and South Korea, policymakers are looking for alternative export markets, but Chinese neighbors have proven less interested in their goods than was previously hoped.

After nearly three years of falling exports, Thailand is searching for a new growth driver, although the Thai Central Bank is hoping exports will grow again by the end of the year. In an interview with Reuters, Bank of Thailand Deputy Governor Paiboon Kittisrikangwan said his country needs a new strategy for growth. "We need to do some soul-searching as to whether we can continue to rely on external demand to the extent we have so much in the past,” he said.


U.S. Struggles

American consumers show little sign of spending significantly more on goods, whether made in Asia or here at home. With weak imports of manufactured goods, domestic productivity is also stagnated. According to the Federal Reserve, industrial production fell 0.2% in May after falling 0.5% in April, while industrial capacity utilization fell to 78.1%, below the long-term average.

Regional studies of manufacturing also showed signs of a slowdown, with the New York and Chicago Federal Reserves’ announcing business conditions weakening. According to a study released by the Chicago Federal Reserve on Monday, national economic activity remained negative (a reading of -0.17) in May, with sales, orders, and inventories remaining the largest headwind to the index.

The Trans-Pacific Partnership Impact

Economists and policymakers on both sides of the Pacific are hoping the Trans-Pacific Partnership (TPP) will re-invigorate exports to the United States. Critics, however, note that the TPP has limited rules for currency manipulation, which in turn could help Asian countries export to the United States only by devaluing their own currencies and putting American exporters and producers at a significant disadvantage.

U.S. President Barack Obama, who requested that Congress give him authority to make speedy trade deals with Asian countries party to the agreement, has aggressively pursued the TPP. The House of Representative approved the so-called “fast-track” legislation passed by a narrow margin late last week.

Courtesy Economy Watch (More Articles Here)   

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