Has the Global Trade Revival Run Out of Puff?

A revival of global trade this year may be running out of steam before it has got under way, with widely ­followed data indicating a slowdown in the pace of growth as analysts warn of sluggish demand in industrialised and developing countries alike.

Figures from CPB World Trade Monitor, a research bureau at the Dutch ministry of economic affairs, show growth in the volume of global trade slowing to 1.4 percent in the quarter to March, down from a recent high of 2.6 percent in January, as the first chart shows. January’s rate was the fastest for seven years, helping fuel hopes that the world economy was back on a path to growth after two years of disappointing performance.

Economists have been encouraged by the promise of a “reflation” of the US economy and of a revival in the fortunes of emerging economies, especially those in Asia. Indeed, compared with the same month last year, emerging market exports surged in March, by nearly 10 percent.

Global trade as a whole rose by 5.6 percent on that basis, according to the CPB. Analysts have pointed to a recovery in commodity prices, the resilience of China’s construction industry and the integration of supply chains between China and other Asian manufacturing countries as drivers of export growth.

But Simon Evenett, a trade specialist at the University of St Gallen, warned against reading too much into the surge in the year­-on-­year figures. CPB’s seasonally­ adjusted data typically show a significant fall in trade volumes in the month of March.

This year, they showed a significant increase ­ perhaps because the Easter holiday fell a month later than usual, in April. Even smoothing out the year-­on-­year figures by comparing moving three-­month periods, as shown in the second chart, the unusual March data were enough to produce a surge in the annualised comparison that Mr Evenett described as “precious little signal and too much noise”.

He noted that there had been two jumps in world trade in the most recent six months of data, in March and in November last year. “The growth hasn’t been sustained, nor is it broad-based,” he said. The quarterly data ­ which the CPB describes as revealing the “momentum” of trade ­ show that the upturn in volume growth has been led by exports from emerging markets, which grew at a quarterly pace of more than 4 per cent in January, also the fastest for seven years. But the pace slowed to 1.9 percent in the quarter to March.

David Mann and colleagues at Standard Chartered Bank in Singapore argued in a report last week that the drivers of recent export growth in Asia were “temporary”. “The first was the rise in goods export prices,” they wrote, “led by the rebound in commodity prices from their lows of Q1 2016.

The second was China’s inventory rebuilding, which is already showing signs of slowing . . . We believe that Asia’s export growth has already peaked or is close to peaking.” Freight rates suggest that trade between Asia and developed markets may also have peaked. The average cost of shipping a 40­foot container from China to northern Europe rose from about $400 in March last year to a recent high of $2,081 in October, according to Xeneta, a Norwegian firm that monitors container freight rates.

It has since fallen back to about $1,719. Patrik Berglund, Xeneta’s chief executive, said shipping industry consolidation, bottlenecks and other factors were also at play, but that shipping lines would struggle to hold rates high as their customer demand fails to keep pace with the supply of very large new ships being delivered from this


By Jonathan Wheatley

Published on Jun 04,2017 [ Vol 18 ,No 892]



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