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In the fourth quarter of last year, things were all declining. Economic growth was negative all over the world; US, EU, Japan and every country in Asia with the exception of only China, which still registered a positive growth yet at a much lower rate than usual. Exports of all countries in Asia decreased in that quarter as a consequence of the markedly reduced consumption and investment in major buying countries; i.e. US, EU and Japan.

In January and February, exports of countries in Asia were still decreasing except for those of Taiwan, Korea and Singapore which increased in February. A further study revealed that these increases were due mainly to a sizeable increase in their exports to China, as the Chinese economy has recovered from a slowdown since January. Retail sales, property sales and car sales in China increased in both January and February; notably in February, the car sales increased by 2 million cars. Another index indicating the recovery of the Chinese economy was an increase in new loans of as high as 24 per cent in February. However, China's overall exports still decreased in the first two months. This implied that an increase in imports from Taiwan, Korea and Singapore was not mainly for manufacturing and re-exports but for final demand in China. This interesting fact is quite cheerful as it indicates China is growing to become another major buying country on which Asian exporting countries can depend more in the future. The question then is, while final demand in China is increasing, how come Thai exporters could not take advantage from such final demand as much as Taiwan, Korea, and Singapore? I have no answer and would ask the Thai Chamber of Commerce to find it out.

Further study revealed that besides many pieces of good news in the Chinese economy, some positive signs also appeared in the US economy. Retail sales which increased in November, then decreased in December, bounced back to positive growth both in January and February and are likely to increase further. Likewise, inventory, which used to be abundant, decreased for the first month in February resulting in the increase of finished product price index from +0.1 per cent in January to +3.2 per cent in February. Moreover, home sales as well as house starts in the US increased month on month for the first time in February. Car sales in March also increased to 9.4 million cars as compared to 9.1 million in February. These facts indicate that the decrease in manufacturing is likely to bottom out soon. Manufacturing in the US may increase in the near future and thus an increase in unemployment should slow down as a consequence.

However, such positive signs have not appeared in Europe and Japan. Retail sales and car sales in Japan are still decreasing. Economists forecast a higher contraction rate for Japan in the first quarter than the 12.7 per- cent contraction rate in the last quarter. The European Union, which contracted at 6.4 per cent in the last quarter, may also contract at a higher rate. However, there is some good news in Western Europe where car sales increased month on month for the first time in February and the survey of Purchasing Manager Index in Europe showed an increase for the first time in March. It is believed that if US consumption, which has increased as per retail sales figures, would further expand and if the US manufacturing would recover as mentioned above, the EU economy - exports of which mainly go to the US market - would have a chance to recover. However, the recovery in the EU is likely to come three to six months after the US recovery, if any.

The above-mentioned facts and likely scenarios should be further observed and analysed by Thai exporters in order to locate potential opportunities in various parts of the world. China, with huge population and ever growing inland provinces, should be a market of highest potential for Thai exports due to its proximity. Exporters acquainted with the Chinese market should be in a better position to identify these opportunities. Exporters who mainly dealt with western economics may need to adjust themselves to a certain extent in order to get access to the new gigantic market in China. The US market, which may recover according to the positive signs mentioned above, should not be growing as fast as it used to in the old days as credit extension in the US still does not function properly. It remains to be seen whether the new measure recently announced by the US Treasury would be effective. This new measure would provide an easy access to funding support for private investors to buy out distressed assets from financial institutions. If private investors take advantage of this program and take out a large enough volume of distressed assets, financial institutions should soon be in a position to perform their normal credit extension duty to support the economic growth again. This is worth being closely studied.

Until Next Monday.