Monday, April 15, 2013

15/4/2013: Advanced economies exports: converging in growth trends?

Quite an interesting new trend that emerged since the late 2000s and is reaching well into 2012-2013 so far is the trend of convergence in the rates of growth in exports of goods and services between euro area, the US and Japan.

Here are few charts:

 Note, the above correlations convergence is also confirmed on a 20 year rolling basis.



One thing is pretty clear from the above: while prior to 2004-2005 the US exports dynamics remained relatively weak compared to those of the euro area, since 2005, the picture has changed dramatically, with the US exports dynamics falling pretty much in line with those of the euro area.

Here are some interesting facts:

  • On a cumulated basis, from 1981-2012, volume of exports has expanded from index reading of 100 in 1981 to 406 in 2012 for Japan, 352 for the UK, 505 for the US, 812 for the Advanced Economies and 715 in the euro area, highlighting the fact that the euro area overall cumulatively outperformed all other economies in the comparison group.
  • Similarly, on cumulated basis, from 2000 (index=100) through 2012, volume of exports index rose to 156 in the case of Japan, 137 in the case of the UK, 156 in the case of the US, 227 in the case of the Advanced Economies and 237 in the case of the euro area, once again confirming euro area outperformance over the period.
  • In contrast, on cumulated basis, from 2004 (index=100) through 2012, volume of exports index rose to 124.5 in the case of Japan, 122.1 in the case of the UK, 151.6 in the case of the US, 166.4 in the case of the Advanced Economies and 154.8 in the case of the euro area, showing closing gap in euro area outperformance compared to the US over the period.
The drivers for these changes are most likely a combination of factors including:
  • Technological and supply chains convergence in traditional sectors;
  • Increased openness in the euro area to trade;
  • Changes in currency valuations with the introduction of the euro and the effects of the current crisis on currency valuations;
  • Improving energy component of the total cost basis in the US, and
  • Shift in exports growth toward services sectors (composition effects).
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