Download Global Watch:May 2008（Global Economy）

June 18, 2008
Global Watch
《Global Economy》
1. US Economy
Plummeting Auto Sales .......................................................................... 1
2. UK Economy
Economy is slowing. ................................................................................ 2
3. Chinese Economy
Trends of trade balance by region ......................................................... 3
This is an abstract of our monthly reports on the Japanese Economy.
The information and the views contained herein are subject to change
without notice.
Economic Research Department
1. US Economy：Plummeting Auto Sales
By Tadao Hosoo, Economist
Auto sales in the US has been dropping since the beginning of the year. Initially credit
tightening on auto loans induced by the subprime mortgage turmoil was considered as the main
cause, but recently rising gasoline price is being suspected as the major culprit.
The turning point was Ford Motor Company’s press conference held on May 22, where
it made clear that it would expect another money-losing year in 2009 because of the gasoline
price hike. Alan Mulally, CEO of the company said that the sales of pickup trucks, their most
profitable line of products, is dropping rapidly due to rising gasoline prices, and that structural
changes have occurred in the US auto market.
According to the US Department of Commerce statistics, motor vehicle sales in April
was 14.40 million units (annualized), which was a large decrease from the previous year at
16.21 million units (annualized). While the sales of passenger cars slightly increased (from 7.38
million units to 7.48 million units), trucks, including pickups and SUVs, dropped significantly
(from 8.84 million units to 6.92 million units). It was indeed the decrease in truck sales of 1.92
million units, which brought down the total number of motor vehicle sales (for the decrease of
1.81 million units).
Among popular models, pickups -- such as Ford F-150 (top sales model), Chevrolet
Silverado (third place in sales), and Dodge Ram (eighth place) -- that are classified as trucks
have experienced double-digit sales plunge from the previous year, while compact cars -- such as
Toyota Camry (second place), Honda Accord (fourth place), and Ford Focus (eighth place) -recorded a year-on-year increase.
Even Japanese automakers, which are said to be faring relatively well, are performing
poorly in the pickups category as can be seen in the fact that Toyota Tacoma and Tandora have
recorded double-digit sales drops. It is apparent that no matter the maker -- US or Japanese -pickup trucks that were deemed as the symbol of the US and maintained popularity as such are
losing thrust.
Gasoline prices in the US were around 2 dollars per gallon at the beginning of last year,
which reached 3.97 dollars during the last week of May this year (the average retail price of
regular gasoline across the US), seeking for the first time ever four dollar mark. During the oil
crises in the past, gasoline price hikes were followed by surges in wages. But this time, as the
rate of increase in wages is being suppressed compared with that of increase in gasoline prices,
it is squeezing the household budget of middle class and below.
Economic Research Dept.
1
Global Watch（Global Economy）
May 2008
Unless gasoline prices become significantly lower, consumers will likely continue to shy
away from fuel gobbling pickup trucks. The fact that the plunge of sales is observed only in a
specific type of models means that gasoline price hikes, rather than the credit contraction, are
likely the major cause of the stagnant auto sales.
The Big 3 automakers, which have recently shown significant recovery through
expanding sales in the foreign markets, are exposed to a newly developing unfavorable wind, as
seen in the case of Ford Motor announcing postponement of its plan for rebuilding. In addition,
Japanese automakers, which have aimed for high yielding pickup truck market as their new
field to expand, must review its business plans. Increasing gasoline prices could trigger
resurfacing of management problems at US automakers, and accelerate deterioration in
business performance of Japanese automakers.
(2008.6.2)
Chart 1: U.S. New car sales
（Million unit）
（Million unit）
New car sales (R-H）
Pickup truck （Domestic manufactureｒ, L-H）
Passenger car （Domestic manufacturer, L-H)
Foreign manufacturer （L-H）
90
80
200
190
70
180
60
170
50
160
40
30
150
20
140
06
07
08
Source: U.S. Department of Commerce
2. UK Economy : Economy is slowing.
By Tadao Hosoo, Economist
The UK economy is slowing. The real GDP growth for January-March quarter of
2008 was 0.4% on a quarter-on-quarter basis (qoq) to mark the lowest growth in 3 years,
which was due partly to the sluggish financial services sector.
Economic Research Dept.
2
Global Watch（Global Economy）
May 2008
In the corporate sector, the growth rate of manufacturing production in March fell to
0.6% over the previous month. In the household sector, retail sales in April rose by only 4.2% on
a year-on-year basis (yoy), another slowdown for 3 months in a row, due to decline in house
prices for the first time in 16 years.
Consumer prices rose by 3.0% yoy in April, exceeding the center (2%) of the target
range set by the Bank of England for six months in a row, raising concerns over increasing
inflationary pressures.
At the meeting of the Monetary Policy Committee (MPC) of the Bank of England held
on May 8, the official bank rate, its key interest rate, was unchanged at 5%. In order to cope
with the US subprime mortgage turmoil, the rate was lowered three times since last December.
However, as the inflation is progressing at a pace faster than the BOE had anticipated, the rate
is likely to be unchanged for the time being.
(2008.6.2）
Chart 2: U.K. Halifax House Price index
(yoy,%)
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
-5.0
-10.0
-15.0
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08
Source: Datastream
3. Chinese Economy：Trends of trade balance by region
By Mariko Noda, Economist
China continues to show huge trade surpluses with North America and Europe,
while constantly marking deficits with Asia and Middle East (Chart 3). The performance
during January-April suggests that trade surplus as a whole would probably decrease this
Economic Research Dept.
3
Global Watch（Global Economy）
May 2008
year, along with a reduction in trade surplus with the U.S. Also, the need to secure natural
resources is causing trade deficits to increase with Africa and Oceania.
On the other hand, there are some changes in China-Asia trade where China has
constantly recorded trade deficit. As can be seen in Chart 4, China's trade deficit with ASEAN
countries is on a decreasing trend. While there are still huge deficits recorded with Malaysia,
the Philippines, and Thailand, surpluses are increasing with Vietnam, Singapore, Myanmar,
and Cambodia. China’s wood products exports to Singapore have increased significantly during
January-April, in addition to exports of electric and other machineries, which reflect the real
estate boom in Singapore. Regarding to exports to Vietnam, where income has increased owing
to higher economic growth, exports of consumer goods such as clothing are growing rapidly on
top of machineries and metal products. To both Singapore and Vietnam, exports of transport
machinery are increasing significantly, which is considered to be a result of active sales
promotion abroad conducted by Chinese automakers.
（2008.6.11）
(Billion dollars）
Chart3: China's trade balance by region
（Billion dollars）
350
300
250
200
150
100
50
0
-50
-100
-150
30
Chart 4: China's trade balance with each
ASEAN countries
20
10
0
-10
-20
-30
-40
-50
01
02
03
04
Asia and Middle East
Europe
North America
Trade balance
05
06
Africa
Latin Amarica
Oceania
07
01
08*
02
03
04
Indonesia
Philippine
Vietnam
Brunei
Cambosia
Trade balance for ASEAN countries
Note: Figure for 2008 is annualized figure of actual Jan.- Apr. 2008 data.
.Source: CEIC
05
06
07
08*
Malaysia
Thailand
Singapore
Myanmar
Laos
Note: Figure for 2008 is annualized figure of actual Jan.- Apr. 2008 ｄata.
.Source: CEIC
Economic Research Dept.
4
Global Watch（Global Economy）
May 2008