After some hopeful economic news at the end of 2012, a few recent reports have given some of us cause for concern in 2013. It turns out that in last quarter of 2012, the economy shrank by nearly 1%. This is in contrast to an earlier projection the economic growth at the end of 2012 would be near 2%. Another piece of bad news is that our trade deficit is at an 8 month high, indicated that US exports have slowed.
But many economists still remain optimistic. Manufacturing and housing continues to improve, the type of products imported indicate that there is continuing strength in consumer demand. Much of the imports were consumer goods like cell phones, iphones, cars, jewelry and clothing. Many economists are seeing an improving global market in 2013, which is good news for US manufactures. A lot of the contraction was due to defense spending cuts. The private sector actually expanded.
China continues to be the wild card in this economic foray. The Chinese economy had 7 consecutive quarters of slow economic growth, but many are seeing a rebound as December exports were at the highest level in two years. Chinese inflation was very modest during that period of time, but many are worried that inflation could increase to 5-6% annual rates as a combination of factors are putting upward pressure on consumer goods.
High inflation in China will continue to push wages higher. The wage increases over the last three years combined with higher shipping costs have caused some manufacturers to “pull back” some manufacturing back into the US. China’s effort to curb inflation could have a number of side effects such as hampering growth.
US Manufacturing has grown at its fastest rate in nearly a year; another indication that the domestic consumption is still strong and businesses have high confidence going into 2013. All this points to the trade imbalance with China improving toward the end of 2013.
Packnet continues to see a higher demand for its export packing and crating services, particularly from our manufacturing customers.