The dramatic increase in China’s trade balance in July could indicate a number of possibilities. One is that the country’s currency is more fairly priced. That’s barely true. Another is that Chinese consumers are buying less and saving more as inflation climbs, particularly in the real estate market. Maybe, but there is usually little incentive to save if inflation is steadily reducing the value of the savings.

A third possibility is that China’s export tax rebate brought forward a good deal of future exports. Statistics are not yet available for July, but in June traffic at China’s ten top container shipping ports fell by nearly 2% according French consultancy Alphaliner. Merchandise exports reached an all-time high of $137.4 billion in June, as exporters rushed to meet the July 15th expiration of export tax rebates on commodities like steel and other metal products.

Contributing to the record numbers were backlogs that developed as carriers such as Danaos Corp. (NYSE:DAC), Seaspan Corp. (NYSE:SSW), and A.P. Moeller Maersk (OTC:AMKBF) were slow in getting their fleets back in the water following the recession.

The Global Port Tracker report issued by the National Retail Federation and Hackett Associates indicates that US retailers shipped early to avoid dealing with additional container ship shortages. The month of July “is likely to be the peak shipping month for 2010 rather than the traditional rush of holiday season merchandise in October.

Through June, imports at US ports totaled an estimated 6.9 million twenty-foot-equivalent units, called TEUs. The annual estimate for 2010 is 14.5 million TEUs, up 15% from a dismal 2009, when 12.7 million TEUs were shipped. In July, an estimated 1.38 million TEUs arrived at the nation’s ports, up 25% from a year ago.

All those imported goods did not translate into increased retail sales. Same-store sales growth was 2.9% in July, below estimates of 3.1%, and retailers are hoping for a solid back-to-school season to boost sales going into the end of the year.

Chinese currency policy and Chinese consumers do have a real effect on US economic growth. But the US consumer drives the country’s economy, and consumers are still wary over jobs, credit, and stagnant wages for those who do have jobs.

Paul Ausick

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