Export activity increases among major global economies as US demand increases

26 July 2017 Consultancy.uk

EU exporters are preparing to meet increased demand from the US, particularly for machinery. Policy uncertainty as a result of the Trump administration meanwhile suggest other regions, particularly the neighbours of the biggest single economy on earth, are facing new challenges however.

Grant Thornton, as part of its global International Business Report, routinely surveys 2,500 businesses across 36 countries to identify key trends currently affecting their respective markets as well as a range of key economic indicators. One aspect of the study asks respondents about their export activity.

In the latest of a number of studies to suggest markets remain positive despite a politically rocky start to the new presidency, the most recent edition of the report found that exporters across the 36 economies considered tended to be upbeat about their export activity, the metric has hit an 18-month high. Germany saw an increase in planned exports over the previous quarter of 13% to 35%, Greece climbed 8% to 34%, while India saw an increase of 6% to 34%. The Netherlands and Ireland too saw increases of 12% and 10%respectively.

One of the reason for the large increase in planned exports is a recent large increase in prospective demand from the US for plant equipment and machinery over the next 12 months, as investment intent for infrastructure increased by 41% in the first quarter of this year.

EU exporters positive on back of increased demand from US

While planned export activity has hit an 18-month high however, there are significant challenges ahead as exporters must balance positive long-term trends against the potential for sudden policy shifts. Commenting on the move, Paul Raleigh, Grant Thornton Global Leader-Growth and Advisory services, said the strong US dollar had placed imports at an advantage compared to local products, stating, “Export expectations are up in the G7 and the EU. This suggests businesses are aiming to tap into the US market.”

European view

While EU businesses have begun to ramp up production to meet expected demand from the US, other areas, such as Canada and Mexico face policy related uncertainty with a succession of presidential tweets and public outbursts rendering the future of continental trade agreement NAFTA unclear. Raleigh added, “In Canada, export expectations fell significantly in Q1 to 9% – which coincided with the new US administration declaring it may scrap the North American Free Trade Agreement (NAFTA). In recent weeks, however, it appears NAFTA may be renegotiated rather than ended. It will be interesting to see how firms in Canada and Mexico respond next quarter.”

For the UK, Brexit continues to throw a spanner in the works for UK businesses in terms of their economic planning, even while the lack of a mandate for Theresa May’s Government may mean that the end result for the divorce between the UK and Europe may not be as hard – which given the effect on various export businesses may be a sign of relief. The need for the UK to renegotiate trade deals with international partners creates additional longer-term uncertainties however. Raleigh concluded, “What’s clear is that despite current export confidence, business plans will need to be flexible. The most successful businesses will assess the likely impacts of both longer terms tends and sudden shifts in policy, and be ready to react swiftly and decisively.”

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