16 Sept 2015
Global Economic Performance Sees Export Forecast Revised Downward Amid Reverses in 3Q15 HKTDC Export Index
The HKTDC Export Index monitors the current export performance of Hong Kong traders and gauges their near-term prospects.
- Hong Kong exports have been lacklustre to date, a consequence of the weaker-than-expected global economic performance. Most notably, the Greek debt crisis has continued to hamper the EU recovery, whereas China’s economy has stayed flat despite various stimulus measures.
- The world trade environment is set to remain challenging for the rest of this year. Although the US is expected to maintain steady economic growth, imminent interest rate hikes may lead to more volatile capital flows and exchange rate movements in the emerging markets.
- While Hong Kong exports may benefit somewhat from the recent RMB depreciation, such positive effects seem likely to be offset by intensified competition from other Asian economies, a number of which have also had their currencies depreciated to varying extents.
- As such, the world trade environment remains uninspiring. Hong Kong exports are projected to be flat throughout 2015, undermining prospects for the 3% rise forecast in December.
- This increased pessimism is borne out by the 3Q15 Export Index, which indicates a significant deterioration in confidence on the part of Hong Kong exporters, with the overall reading plummeting from 46.8 in 2Q15 to 37.1, the lowest since 4Q12.
The HKTDC Export Index plummeted to 37.1 in the third quarter of 2015 (3Q15), down from 46.8 in 2Q15. This followed two consecutive quarters of improvement. Overall, exporters were far less optimistic about their likely export performance over the short-term.
Except in the jewellery sector, all the major industries reported lower readings for 3Q15. In particular, the index for toys slid by 16.9 to 35.6, taking it below the watershed mark of 50 and signalling contraction in the near term. Except for machinery exporters, however, all sectors had indices below 40, reflecting pessimism as to the likely export performance over the short-term.
Export sentiment across all the major markets deteriorated when compared to the previous quarter. The indices for Japan, the Chinese mainland and the US fell back, after hovering around the watershed mark of 50, while the index for the EU receded rapidly from its second quarter performance, registering at 42.8 in 3Q15.
The Offshore Trade Index plunged to 35.7 in 3Q15, down from 43.0 in 2Q15. This indicated that exporters were less positive with regard to their offshore trade performance (i.e. those shipments not passing through Hong Kong, but handled by Hong Kong exporters). With a lower reading than the HKTDC Export Index, Hong Kong’s offshore trade is likely to be seen as underperforming when compared to the city’s overall exports in the near term.
The Trade Value Index dropped to 42.6 in 3Q15, from 49.4 in 2Q15. Except for timepieces, all major industries reported readings below the watershed mark of 50 in 3Q15. Sustained unit prices are expected in the near term for timepieces, with their indices remaining in positive territory (51.4 in 3Q15).
The Procurement Index saw a strong downturn, declining to 38.2 in 3Q15, down from 50.8 in 2Q15. A reading below the watershed mark of 50 indicates that procurement activities are likely to decrease in the near term. With readings as low as 34.6 and 37.1, respectively, jewellery and electronics exporters showed the weakest procurement sentiment among the major industries in 3Q15, while machinery exporters were the least pessimistic.
The Employment Index decreased to 43.9 in 3Q15, down from 46.8 in 2Q15. Except for machinery, all industries showed lower readings than in the previous quarter. In particular, the index for toys slumped by 11.2 to 43.0 in 3Q15, signalling labour retrenchment in the near term. By contrast, hiring confidence was sustained in the machinery sector, which reported a reading of 48.8 in 3Q15, matching that of the previous quarter.