Recovery in US, Europe offers much needed optimism

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Bikky Khosla | 27 Aug, 2013
Some recent positive developments on the global economic front give a cause for optimism for our exporters.

First, Europe is healing. Although recession still haunts some of the major economies in the continent, there are now some strong signs of a turnaround, with recently released data estimating a stronger-than-expected 0.3 rise in GDP in both the euro area and the EU27 during the April-June quarter, compared with the previous quarter. Germany and France led the recovery, posting 0.7 percent and 0.5 percent growth, respectively. Britain also expanded at the same rate as Germany. These developments, along with gradually picking up industrial activities, manufacturing and consumer spending in the region, herald good news for our exporters.

Second, positive developments have started gathering pace also in the US. According to a series of data released recently, the number of Americans filing for jobless benefit claims for the week ended August 17 remained near five-year lows; in August, manufacturing activity hit a five-month high and builder sentiment jumped to the highest level since 2005; and consumer confidence hovered to a six-year high in July. In addition, it is also encouraging to see that our exports to the US are increasing - in fact, for the April-June period, the US replaced the UAE as our biggest export destination, accounting for about 14 percent of our total exports.

Europe and the US are two of our largest export markets, and it is really encouraging to see recovery in these two economies.

Meanwhile, our July export figures give us some respite. After two consecutive months of contraction, exports rose 11.6 percent to $25.83 billion, up from $23.14 billion in July 2012, and although this high growth can be explained by a low base effect, as exports declined 14.8 percent in July last year, and also by depreciation of the rupee that has fallen 12 percent against the US Dollar since May, such a development is more than welcome in this otherwise dull economic environment.

No doubt, it is too early to lie back and relax, but it is a joy to see that the restraints, which have crippled global demand for such a long time, are beginning to break. The surge in July exports seems to be driven mainly by the weak rupee, the effects of which, according to some experts, are yet to be reflected in our export figures for the remaining months of the current quarter. But exports driven by such a way cannot do much good to an economy. For real export revival, there must be strong demand in our overseas markets, and fortunately, the recent developments in the US and Europe point towards the latter.

I invite readers' feedback. Do you think the economies of Europe and the US are on the mend? Are you witnessing a gradual rise in order books from these markets?