The export slump isn’t over yet in APAC

Export volumes of Asian goods are tumbling at a pace not seen since the onset of the pandemic in 2020. The pandemic slump proved short-lived, but we think the current plunge in exports has further to run, with sequential declines likely this quarter and next.

We expected Asia’s export outperformance to end abruptly, but the steepness of the plunge has exceeded even our downbeat expectations. Last October, we highlighted three drivers of the export slowdown:

1. a post-pandemic shift in global consumption back to services
2. a turn in the global semiconductor cycle
3. an easing of demand due to weak growth in key export partners

What you will learn:

• Close analysis of the data suggests more influence so far from the consumption shift and semiconductor trade. The big question now is whether weak growth will come more into play.
• Downside risks around export-partner growth have moderated recently. Still, a global recession in H1 remains our baseline view, which would weigh further on Asian exports.
• We also doubt the reopening boost from China will be enough to offset that, as its recovery is likely to quickly run into structural headwinds.
• Overall, we expect continued contraction. Albeit with the fall in exports having been more front-loaded than we had expected, we now anticipate more moderate declines over H1 2023.