Japan’s economy likely contracted slightly in the first quarter as corporate and consumer spending weakened, a Reuters poll showed yesterday. Exports also deteriorated amid trade disputes and weaker global demand, hurting the trade-reliant economy. Gross domestic product (GDP) is expected to have fallen 0.2% in January-March on an annualised basis, the poll of 18 economists showed, after it expanded 1.9% in the fourth quarter last year. That would translate into a flat reading on a quarter-on-quarter basis, after the economy grew 0.5% in the October-December quarter, the poll showed. “Firms likely postponed their capital spending on worries about the global economic slowdown and uncertainty over trade talks such as between the United States and China,” said Kentaro Arita, senior economist at Mizuho Research Institute. “We expect consumer spending declined as their sentiment deteriorated led by factors such as rises in food prices.” Capital spending likely fell 1.7% in the first quarter after 2.7% growth the previous quarter, the poll found. Private consumption, which accounts for about 60% of GDP, was seen down 0.1% for the quarter, after rising 0.4% in October-December. External demand – or exports minus imports – was still expected to add 0.3 percentage point to growth in the first quarter, the poll found, after it subtracted 0.3 percentage point from GDP growth in the previous quarter. Analysts say a drop in imports due to weak domestic demand was larger than a decline in exports, which led Japan’s net exports to improve for January-March.“We project exports will grow moderately but they will lose momentum on the global economic slowdown,” said Akane Yamaguchi, researcher at Daiwa Institute of Research. Like other Asian exporters, Japan has been hit by China’s economic slowdown and the 10-month-long US-China trade war, which has disrupted global supply chains. Sluggish demand for electronic gadgets has also hit its hi-tech exports. Yesterday, the US sharply raised tariffs on Chinese goods and China said it would retaliate, adding to uncertainty over external demand in the second half of the year. Japan ships parts and heavy machinery to manufacturers in China. The Cabinet Office will release the GDP data on May 20 at 8:50am Japan time. Japan’s current account balance is expected to show a ¥3.16tn ($28.80bn) surplus in March from ¥2.68tn in February, thanks to income gains from overseas investment, analyst said. The government will announce current account balance data at 8:50am on May 14.

Most European equities rebounded yesterday as investors bet on Beijing and Washington ending their trade war, mirroring earlier gains in Asia, but Wall Street investors seemed more sceptical of the chances for any 11th hour breakthrough. The contrasting views reflected rattled investor nerves on the day the US doubled its tariffs on a host of Chinese goods, dealers said. Paris and Frankfurt closed higher, while London ran into a late bout of selling to end a touch lower. Paris’s CAC 40 was up 0.3 % at 5,327.44, Frankfurt’s DAX 30 gained 0.7 % to 12,059.83 and London’s FTSE 100 was down 0.1 % at 7,203.29 points at close yesterday. Across the Atlantic meanwhile the Dow index was down by more than 300 points in the late New York morning. “US stocks are extending a weekly drop, which is poised to be the largest of the year, with the US following through on its threat to increase tariffs on Chinese goods as the two sides continue talks today in Washington,” the Charles Schwab brokerage said. In a brief respite from trade woes, Uber kicks off its Wall Street listing yesterday with a vast share offering that values the ride-hailing giant at more than $82bn.US President Donald Trump has pulled the trigger on a steep increase in tariffs on Chinese goods, ramping up punitive duties on $200bn in imports from 10% to 25% in a major escalation of the bitter trade war between the world’s two biggest economies. However, Russ Mould, investment director at stockbroker AJ Bell, said markets were adopting a wait-and-see approach – and he suspected that a deal would eventually be clinched. “Investors hate uncertainty as it leads to speculation about what might and might not happen. Once they have the real facts, investors can properly assess the situation,” Mould told AFP. “I suspect that markets still believe a deal can and will be done, because both President Xi and President Trump need one,” he added. The tariffs news failed to derail markets in Asia and Europe, after Trump stated also that he had received a “beautiful letter” from China’s President Xi Jinping – and that it was “possible” to get a deal. “Xi needs a deal to keep economic growth on the road, because the ongoing credibility and legitimacy of his tenure and the Communist Party more generally rests on jobs and prosperity,” said Mould. “Trump needs one because he seems to measure his success by where the Dow Jones Industrials is trading and because he has an election to fight in 2020. “Winning that will be a lot harder if the US economy is slowing down or even turning down,” the analyst added. In Asia, Shanghai led gains at the end of a torrid week for equities, with investors nevertheless keeping a eye on the ongoing China-US trade talks. Both Shanghai and Hong Kong bounced back on hopes the economic superpowers will be able to reach a deal to avert a trade war that most observers warn could shatter global growth and batter markets. But China has vowed to hit back at the tariffs hike, saying it “deeply” regretted the US move. The tariffs came in after the first day of high-stakes negotiations in Washington between Chinese Vice Premier Liu He, US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin. The slightly improved sentiment provided support to higher-yielding, riskier currencies, with the yuan edging higher though it continues to wallow around four-month lows. However, in a worrying sign, Hu Xijin, editor-in-chief of the Global Times – which is published by the Communist Party’s People’s Daily – cited a source familiar with the talks as saying there is “zero” chance of a deal before yesterday. “If it is that bad, the real suspense is whether the two sides will continue negotiations after Friday,” Hu said. In addition to a rosier view on trade talks, European markets also got a boost from strong economic data, including accelerated British economic growth, and a stronger trade surplus for Germany. Frankfurt’s Dax index outperformed its European peers largely thanks to a whopping surge in Thyssenkrupp shares which rose over 20% after the steel conglomerate said it was dropping its merger plans with Tata of India. Meanwhile, the British pound was little changed yesterday after data showed the UK economy got a boost ahead of a Brexit that never came, with traders doubtful Prime Minister Theresa May can reach a deal with the opposition on how to leave the European Union. Sterling did rise towards the end of the European trading session, but that was largely down to broad dollar weakness. Britain’s economy grew at a quarterly rate of 0.5% in the first quarter of 2019, in line with the reading expected by the bank of England, as well as by private-sector economists in a Reuters poll. Business surveys have shown manufacturers built up stocks of goods in case the country left the UK without a transition deal at the end of March. Year-on-year GDP growth picked up to 1.8% in early 2019 from 1.4% in the last three months of 2018, Britain’s Office for National Statistics said on Friday. This was its highest since the third quarter of 2017 and again in line with economists’ forecasts. Momentum in the British economy has been stymied by uncertainty related to how and when Britain will leave the EU, with business investment suffering. But the economy has also proven resilient, with British consumers continuing to spend and manufacturers rushing to deliver orders before the initial Brexit deadline of March 29. The government delayed the Brexit date until end of October as it continues talks with the opposition Labour Party to agree a deal that can muster sufficient support from lawmakers that have repeatedly rejected May’s withdrawal agreement. Sterling rose 0.2% to $1.3035, cutting its week-to-date losses so far to around 1.1%, although analysts were doubtful the pound’s move higher yesterday had legs. Against the euro the British currency dropped 0.1% to 86.30 pence.

A selected group of Italian textile machinery manufacturers led an institutional and trade mission in April 2019, in Thailand. It was organised by the Italian Trade Agency (ITA) and by ACIMIT, the Association of Italian Textile Industry Manufacturers. ACIMIT’s promotes the Italian textile machinery sector and supports its activity, mainly abroad. The mission’s programme included meeting with various local trade association representatives and industry training centres, as well as visits to textile companies and the country’s universities with a textile vocation, according to ACIMIT. The visits to the Thailand textile institute proved especially interesting, a government body that manages planning, development, and support for the textile industry, as well as at the Faculty of Industrial Textiles and Fashion Design of Rajamangala University of Technology in Bangkok. Six ACIMIT member companies participated in the mission namely, Brazzoli, Ferraro, Laip, Ms Printing Solutions, Sicam, and Stalam. “We had a dual goal: to get to know the local textile manufacturing sector’s level of technology and its current needs, and to assess possible forms of collaboration and partnerships between Italy’s textile machinery industry and entities within the Country providing specific textile training. In Thailand, the textile sector is undergoing a deep rooted transformation. There’s a demand for machinery that can cut back not just on production costs, but also on the environmental impact of textile manufacturing,” ACIMIT president Alessandro Zucchi said. The demand for machinery by Thai textile manufacturers is moving towards technologies capable of reducing production costs and increasing production capacity. In 2018, the value of Italian exports to Thailand amounted to €8 million. “I believe the outcome of this mission was on the whole very positive. We allowed local entrepreneurs to become aware of the latest Italian technology in the sector, while at the same time laying the foundations for a more rewarding partnership with local authorities,” Zucchi said.

The Cotton Association of India (CAI) has further lowered the country’s cotton crop estimate for crop year 2018-19 to 315 lakh bales of 170 kg each. This is a reduction of six lakh bales from the association’s previous estimate of 321 lakh bales released last month, due to lower output in Maharashtra, North Zone, Madhya Pradesh, Telangana and Andhra Pradesh. CAI’s April estimate lowers cotton crop estimate for 2018-19 season, which began on October 1, 2018, by two lakh bales for Maharashtra, compared to its March estimate. Like-wise, for the North Zone, Madhya Pradesh, Telangana and Andhra Pradesh, CAI has lowered cotton output estimate by one lakh bales each. “The scarcity of water in some states and uprooting of cotton plants by farmers in about 70-80 per cent area without waiting for 3rd and 4th pickings are the main reasons for reduction in the cotton crop this year,” the CAI said. Total cotton supply estimated by the CAI during the period from October 2018 to April 2019 is 314 lakh bales of 170 kg each, which consists of the arrival of 278.73 lakh bales up to April 30, 2019, imports of 7.27 lakh bales up to April 30, 2019, and the opening stock at the beginning of season on October 1, 2018 at 28 lakh bales. Further, the CAI has estimated cotton consumption during the months of October 2018 to April 2019 at 183.75 lakh bales, while the export shipment of cotton estimated up to April 30, 2019 is 42.50 lakh bales of 170 kg each. Stock at the end of April 2019 is estimated by the CAI at 87.75 lakh bales including 40 lakh bales with textile mills and remaining 47.75 lakh bales with CCI, MNCs and others (MNCs, traders, ginners, etc.). The yearly balance sheet projected by the CAI estimates total cotton supply till end of the cotton season i.e. up to September 30, 2019 at 374 lakh bales of 170 kg each consisting of the Opening Stock of 28 lakh bales at the beginning of the cotton season, cotton crop for the season estimated at 315 lakh bales and imports estimated by the CAI at 31 lakh bales, which are higher by 16 lakh bales compared to the previous year’s import estimated at 15 lakh bales. Domestic consumption estimated by the CAI for the entire crop year i.e. up to September 30, 2019 is 315 lakh bales, which is lower by one lakh bales compared to its previous estimate made during last month. The CAI has estimated exports for the season at 46 lakh bales, which are lower by 23 lakh bales compared to the previous year’s cotton exports estimate of 69 lakh bales. The carry over stock estimated at the end of the season is estimated at 13 lakh bales.

Ethiopian garment industry workers are, on an average, the lowest paid in any major garment-producing company worldwide today, according to a report by the New York University Stern Centre for Business and Human Rights that says eager to attract foreign investment, the government promoted the lowest base wage—$26 a month—in any garment-producing country. In comparison, Chinese garment workers earn $340 a month, those in Kenya earn $207 and those in Bangladesh earn $95, say Paul M. Barrett and Dorothée Baumann-Pauly, the report’s authors. The report is based on a visit earlier this year to the flagship Hawassa Industrial Park that opened in June 2017 in southern Ethiopia and currently employs 25,000 people, according to US media reports. Ethiopia is now inviting global garment manufacturers to set up shop in its mushrooming industrial parks. Most young Ethiopian workers are hardly able to get by to the end of the month and are not able to support family members, according to the report. The minimum monthly living wage in Ethiopia is reportedly about $110. With very little training, employees have protested by stopping work or quitting altogether. Productivity in the Hawassa factories is typically low, while worker disillusionment and attrition are high, the report says. Blaming Ethiopian politics for unexpectedly disrupting factory operations, the report urges the government to implement a long-term economic plan for strengthening the apparel industry and establish a minimum wage that ensures decent living conditions.

US President Donald Trump’s tariff increase to 25 per cent on $200 billion worth of Chinese imports took effect today beginning 0401 GMT, as negotiators from both countries resume their high-stakes trade negotiations in Washington, DC. US Trade Representative Robert Lighthizer and treasury secretary Steven Mnuchin briefed Trump yesterday on the negotiations. Lighthizer and Mnuchin had a working dinner with Chinese Vice Premier Liu He last night and agreed to continue talks Friday morning, according to White House spokesman Judd Deere. Goods in the more than 5,700 affected product categories that left Chinese ports and airports before midnight will be subject to the original 10 percent duty rate, a US Customs and Border Protection spokeswoman said. The grace period was not applied to three previous rounds of tariffs imposed last year on Chinese goods, which had much longer notice periods of at least three weeks before the duties took effect. Trump gave US importers less than five days notice about his decision to increase the rate on the $200 billion category of goods to 25 per cent, which now matches the rate on a prior $50 billion category of Chinese machinery and technology goods, global newswires reported. Data transmission devices, furniture, lighting products, auto parts, vacuum cleaners and building materials are high on the list of products subject to the higher duties. Until last weekend, it appeared that a deal was in sight. But U.S. officials said this week that China had backtracked on commitments it had made earlier. They didn’t specify what the commitments were.