In a move that may perhaps come as no surprise in light of rising US-Chinese tensions, a global trade barometer (GTB) has indicated a slight contraction of worldwide trade for the next three months.
The losses, according to the DHL Global Trade Barometer (GTB), which was launched last year, led to an overall drop in the world trade outlook by 8 points, to a new index value of 48. In other words, world trade – forecasted by trade flows in intermediaries and early-cycle commodities – is expected to decline in the coming three months, albeit mildly.
The overall decline was driven by “significant” losses for both air and containerised ocean trade, which are the GTB’s two fundamental constituents. Air trade declined by 6 to 49 points, and containerised ocean trade by 8 points to 48 index points.
The latest developments continue a downward trend which the GTB has been recording for several quarters since mid-2018. The current contraction is also the first one since 2015 when the GTB – which takes into account historical data from 2013 onwards – measured more than a month-long decline of global trade volumes in the middle of the year.
“Amidst rising US-Chinese tensions, the slightly negative outlook for global trade for the third quarter of 2019 does not come as a complete surprise. The latest GTB clearly illustrates why trade disputes create no winners. Nevertheless, some major economies such as Germany continue to record positive trade growth. And from a year-to-date perspective, world trade growth has still been positive. Hence, we remain confident in our initial prognosis that 2019 will be a year with overall positive, but slower trade growth,” Tim Scharwath, CEO of DHL Global Forwarding, Freight, said.
As one of the parties involved in the current trade disputes, the US saw by far the heaviest losses amongst all GTB index countries, with its outlook declining by 11 points to 44. Those losses were mainly driven by a negative outlook for major export categories, according to the barometer.
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By GlobalDataChina, meanwhile, scored second in terms of losses, with a decline of 7 points to 49 – an index value one point below stagnation. The country’s negative outlook was primarily driven by declining imports in several categories, combined with just minor overall export growth.
Whilst the trade dispute between the two countries has been a looming, growth-impending threat since the GTB’s launch in January 2018, it has never manifested itself as much as now in actual trade forecasts. Given the US’ and China’s large contribution to the global index, their diminishing trade growth rates contribute to a large extent to the projected global decline, the barometer says. The still rather mild global trade contraction can be explained by the fact that during trade conflicts, trade flows do not merely dry out, it adds noting instead, trade routes and supply chains shift into other countries. On a global scale, this partly offsets the negative effects of trade tensions between countries.
Meanwhile, in the wake of the overall weakened trade climate, three GTB constituent countries recorded slower trade growth forecasts while managing to stay above the level of stagnation: Germany registered a 1 point decline compared to the previous quarter, taking its total 52, while India lost 6 points, resulting in an outlook of 53 points. The UK, however, gained 2 points, scoring an index value of 52.
While in addition to China, the East-Asian economies of Japan and South Korea recorded sluggish trade momentum. The index for Japan fell by 7 points to 50, which, the barometer notes, indicates “stagnating trade” dynamics. South Korea is the third GTB country with a forecasted decline in trade growth for the next three months. On the back of a mild decline with 49 points in March 2019, the outlook further declined by 3 pointd to 46 points.
The next GTB update will be released at the end of September.
