China’s slowing economy puts pressure on US exporters
As China’s economy cools, U.S. exporters are increasingly feeling the chill.
Cummins, the big Indiana engine maker, lowered its revenue forecast earlier this month and said it would eliminate 1,000 to 1,500 jobs by the end of the year, citing weak demand from China as a major reason. Schnitzer Steel Industries, a Portland, Ore., firm that is one of the nation’s biggest metal recyclers, is cutting 300 jobs, or 7 percent of its work force, as scrap exports to China plunge. And on Monday, Caterpillar reported lower sales in China and cut its global outlook for 2012.
Job reductions are hitting industries like mining, heavy machinery and scrap metal that prospered as China boomed, illustrating some of the risks to the broader U.S. economy if growth continues to slow in what is now the world’s second-largest economy. Last week the Chinese government announced that gross domestic product grew at an annual rate of 7.4 percent in the third quarter, the slowest pace in more than three years.
Even as the presidential candidates try to outdo each other in promising to get tough on Chinese exports to protect U.S. jobs, experts say the more immediate threat to American workers may actually be the slowing of sales to China, which has bid up the price of much of what the United States sent overseas in recent years.
Overall, China’s growth is expected to decelerate to 7.7 percent this year from last year’s breakneck 9.3 percent pace, adding to fears of a global slowdown, especially with much of Europe in recession and the economic recovery in the United States stubbornly anemic.
Already, softening demand has clipped U.S. exports.
“There’s definitely been an effect from slowing exports to China on U.S. exports,” said Dean Maki, chief United States economist at Barclays. According to his analysis, the drop in exports to China alone is responsible for shaving 0.1 to 0.2 percentage points off the growth rate for the U.S. economy, which expanded at an annualized rate of 1.3 percent in the second quarter.
The recent slowdown in export growth has probably contributed to the loss of 38,000 jobs in the U.S. manufacturing sector since July, while the overall job market has improved and the unemployment rate has fallen. The decline has been striking because exports, along with manufacturing, have been relative bright spots since the end of the recession.
Wall Street will be looking for further signals about Chinese demand Tuesday, as export-dependent giants like 3M and DuPont report their latest results and discuss their business outlook. Earlier, Alcoa, the first such major company to report third-quarter earnings, slightly lowered its estimate for global growth in aluminum demand because of slowing sales in China for products like trucks, trailers and aluminum cans earlier this month.
On Monday, Caterpillar became the latest company to confirm that after a long boom, business in China is down.