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A stabilizing US trade deficit in May to $48.7 bn from $50.6 bn is always good news, but when both imports and exports show signs of a flattening (see chart below), making the connection to world growth becomes inevitable.

Extending the analysis to commodities and equities, we note a close relationship between the rate of trade growth and equities. The similarity between the current declines in oil and equities alongside the flattening out in imports and exports with that of summer 2011 is that both these two trade series are dropping off below their respective 3-month moving averages, something which did not occur during the market woes of summer 2010.

More importantly, the similarity between today’s simultaneous flattening in imports/exports with oil and equities to the 2008 pattern is that the world’s second biggest buyer of oil (China) is now in full easing mode, which was not the case in summers of 2010 and 2011.
Earlier this week, we heard of China’s 6% growth in June imports, half of the prior month, in line with other rapid signs of deterioration such as the 2.2% June CPI, which plummeted from 6.5% in last July.

The diverging signs of global macro slowing are increasingly apparent, even as they emerge from China and the US-long seen as the remaining effective cylinders of the world economy.


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