from Wolf Street:
US exports, a problem that even the Fed warned about, depend on the health of other economies that are buying US products. The emerging markets are important customers for US goods, growing as they evolve from exporters to have more balanced trade. Trade figures from emerging markets (EMs) are only somewhat reliable, but imports’ share of EM’s seaborne trade has grown, and equaled that of exports for the first time in 2014.
So falling commodity prices are now a mixed blessing for the US economy. It multiplies exposure to slowing growth in China, the third largest buyer of US exports, with a 7% share of total exports year-to-date (Census, through September) — as China’s slowing continues to depress commodity prices. Several nations that rely on commodity exports are big customers of the US: Canada, Mexico, Brazil, and Australia — totaling 38% of total exports. All are slowing; Brazil might implode.
The other commodities exporters are in aggregate significant to the US, and some of them are hurting, such as Russia and Venezuela.
As a secondary effect, falling commodity prices slow growth throughout the emerging and developing nations. Their GDP grew 6.3% in 2011, slowed to +5.0% in 2013, +4.6% in 2014, and +4.0% this years. Next year will be worse if China continues to slow and commodity prices continue to fall.
That means hard times for much of the world. For example, metals exports are 15% of GDP for Chile and Zambia, 6% for Peru and Niger, and 5% for Australia and Bolivia. Mining (esp. copper) produces one-quarter of GDP in the Democratic Republic of Congo.
While oil began to crash in mid-2014, other commodities began slowing in 2011, a process that has turned into a rout.
It’s not just oil that’s in oversupply. It’s a broad collapse in prices, from the big three metals (iron ore, copper, aluminum) to agricultural products. There’s even a glut in diamonds. Non-fuel commodity prices have fallen also: down 1% in 2013, -4% in 2014 , and estimated by the IMF to be -17% in 2015. That’s probably optimistic; -20% looks more likely. The 2000-2011 commodity supercycle has died.
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