Asia no refuge from U.S. slump for multinationals
By Wayne Arnold
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Asia may no longer offer multinationals a refuge from economic storms. Export-dependent Asia is succumbing to lackluster growth in developed markets, sapping a key source of growth for the likes of Caterpillar, DuPont and UPS.
A molasses-like recovery pulled U.S. import growth in the third quarter to 3.8 percent over the previous year, down from nearly 11 percent in the 2010 recovery. That, coupled with China’s efforts to cool blistering investment-led growth and inflation, translated into declining industrial activity in the Middle Kingdom. China’s own imports from Asia thus mirror the trend, slowing in November to a 6.5 percent annual growth from a peak of 37 percent in 2010.
The slowdown is sending tremors through smaller Asian exporters that had hoped to use China to wean themselves from dependence on the West. After six months of declining export orders, South Korea’s growth in industrial output slowed to 2.8 percent in December – down from a 5.8 percent increase in November. Confidence among Korea’s manufacturers is at its lowest since mid-2009.
U.S. and European multinationals are also feeling the impact. UPS blamed slowing Asian exports for weaker international revenue. Caterpillar’s sales growth in Asia in the fourth quarter slowed to 32 percent from 67 percent in 2010. The annual growth in DuPont’s Asian sales, which account for just over a quarter of its global revenue, slipped from 26 percent in 2010 to 7 percent in 2011.
The slowdown is not a disaster for most big Western companies. Asia is not a huge market and its long-term growth prospects are still strong. But the decline hurts: Asia provided 43 percent of DuPont’s sales growth in 2010. Last year it supplied only a fifth.
Luckily for DuPont, sales in North America grew 15 percent, more than offsetting slower Asian growth. But in comparison to the slowdown in Asia, accelerating growth in the United States looks fantastic. Until that recovery is strong enough to revive import growth, Asia may have to look on with envy.