Another Macro Theme

Today is a busy day: US jobs data is unambiguously a favorable economic development, China's banks, including the world's second largest bank announcing intentions to cut lending back by 70% in H2 from H1, and a sharp rising in interest rates and and extension of equity market gains, with the S&P 500 moving at least on an intra-day basis through the 38.2% retracement of the bear market.

There is another development though that should not be lost in the shuffle. During the economic downturn, trade fell more than industrial output, which collapsed. It seems typical for trade to fall more than output, even with no protectionism and disruptions in trade finance. The globalization of manufacturing could account for much of the "multiplier" effect.

This suggests that as the global economy recovers, trade activity is likely to increase, and probably stronger than industrial output.

German trade data earlier today was initially overshadowed by the disappointing industrial output data. June industrial output fell 0.1%. The market had expected a 0.5% rise. However the June trade surplus swelled to 12.2 bln euros from 9.5 bln euros in May. The market expected a 10.6 bln surplus. However, the more interesting development was that imports and exports surged. Exports rose 9% in the month. The market had expected less than 1% increase. Imports for 6.8% in June. The market had expected around a 0.7% increase.

Of course, one number, even a strong trade data or a jobs report, does not make a trend. But the development is promising and should be monitored going forward.