Opinions Hans de Jong
These 3 economic developments stand out
Now that there are no official statistics from the US due to the shutdown, I've been delving into some figures that I thought might offer an interesting perspective. As a motorist who pays for his own gas and an economist who tracks oil prices and the dollar, I've been surprised for a few months now that the price of gas in our country hasn't dropped.
Today's first chart shows that the gasoline price, converted to euros, tracks the oil price trend fairly closely. But in recent months, the series have diverged. The oil price in euros is falling, but the gasoline price is rising. An unusual phenomenon. With my carpenter's eye, I'd say the gasoline price should be a penny lower. That's a difference of, say, a tenth of a percent on inflation.
It's not immediately clear to me what's going on here. If I don't know something about energy markets, I call my former colleague Hans van Cleef, now director of research agency EqoLibrium. He knows everything about this subject. But in this case, we couldn't quite figure it out together. I suggested that refining costs might have risen, but he dismissed that suggestion because refining costs per liter are almost negligible. We also rejected the suggestion that the gasoline companies had made a mistake with their currency hedging. That might apply to an individual company, but certainly not to all. Finally, Hans suggested that there might simply be a shortage in the gasoline market due to the loss of Russia. That might be it then. In any case, I remain hopeful that our gasoline price will drop somewhat in the foreseeable future.
AI and Taiwanese exports
There's a lot of talk about artificial intelligence. Will AI fundamentally change the world, and if so, when and how? Who will benefit, and at whose expense? Stock markets are anticipating this. The valuations of companies benefiting from AI, or potentially benefiting in the future, are being boosted. Companies that investors perceive as losing ground due to AI are seeing their shares come under pressure. The question remains: what's actually happening? Well, quite a lot, it seems.
Taiwan's export orders were over 30% higher in September than a year earlier. Taiwan's exports are dominated by information and communication technology products, so I see this as a sign that investment in AI is booming. Countries in the region were the most enthusiastic. Orders from ASEAN countries were over 57% higher than a year earlier. Despite Trump's import tariffs, Americans ordered over 40% more from Taiwan. We, Europeans, are taking it a bit easier, with an increase of almost 17%.
I've also been following the investments being made in the US for data center construction for some time now. It's growing rapidly, as the following figure shows. I find it difficult to find comparable figures for Europe, but I do know that, at least in the Netherlands, there's considerable resistance to the construction of these energy-guzzling, job-poor construction projects that disfigure the landscape. And when you look at the Taiwanese figures, you can't help but wonder if we in Europe, with our ambitions for strategic autonomy, are being particularly clever.
A development I've also been watching for some time with great interest, amazement, and concern is the unstoppable rise of Chinese automotive companies. While the European automotive sector is under pressure, Chinese car exports are exploding. In total, the Chinese currently produce around 30 million cars per year, about a third of the global total. In recent years, as the following figure shows, an increasing share of Chinese production has been exported. This is truly spectacular. In 2021, exports accounted for over 4% of total production, this year around 22%. One wonders how long this can continue and whether it won't lead to further protective measures in various countries.
Despite this growth in auto exports, China's GDP growth slowed in the third quarter. While the economy's size was 5,2% higher in the second quarter than a year earlier, it was 4,8% in the third quarter. Industrial production growth, however, accelerated in September. After a 5,2% year-on-year increase in August, the figure for September is now +6,5%. Private consumption appears to remain the weak spot. Retail sales were 3,0% higher in September than the previous year, compared to 3,4% in August. But for a country with a growth target of around 5% and a desire to shift to domestic demand as the main growth driver, this is far too meager.
In the Netherlands, consumer confidence, as measured by Statistics Netherlands (CBS), improved. It reached its highest level this year in October: -27, compared to -32 in September. It does seem that the economy is trying to recover somewhat.
The same can be seen in the preliminary purchasing managers' indices in the few EU countries for which these figures were published today. For the eurozone as a whole, the purchasing managers' index for the manufacturing and services sectors combined rose from 51,2 in September to 52,2 in October. This was mainly due to increasing confidence in the services sector. The index would have been even higher had the confidence of French purchasing managers not declined. This is undoubtedly related to the political situation in France.
Closing
Our gasoline prices are higher than I'd expect based on the oil price and the euro-dollar exchange rate. There's always hope...
There's significant global investment in AI. This is evident, for example, in the development of Taiwanese exports. While the data likely doesn't allow for any firm conclusions, it seems Europe is lagging behind. It might not be…
Chinese economic growth is slowing, but its car exports are exploding. Where will this lead?
The European economy appears to be picking up somewhat in the short term. We don't have much insight into the US economy due to the shutdown. The Fed is meeting next week to discuss interest rates. They'll be making a decision with a blindfold. Interesting…
Hans de Jong
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