Global Trade Stages Rapid Recovery
Global trade flows bounced back strongly in the summer, marking the largest rise in two decades as air and sea transport channels reopened while demand for consumer goods surged.
The rebound has been led by China, which has increased its share of total exports, and left trade volumes in September less than 2% below their levels at the end of 2019.
The flows of goods across borders were 12.5% higher in the three months through September than in the second quarter, when flows fell by 12.2%, the CPB Netherlands Bureau of Economic Policy Analysis said Wednesday. That was the largest rise since records began in 2000, following the largest fall.
More timely indicators suggest the rebound in trade has continued since the end of the third quarter. Surveys of purchasing managers at factories around the world point to a continued rise in export orders in October, while a measure of container traffic compiled by Germany’s Leibniz Institute for Economic Research and the Institute for Shipping Economics and Logistics hit a record high in the same month.
“The first slump due to the corona crisis seems to have been overcome,” said Torsten Schmidt, director of economics at the Leibniz Institute.
The strength of the trade revival has varied, with China and other developing countries in Asia leading the way, while the U.S. has lagged behind. The CPB’s figures indicate that while exports from China and other developing countries in Asia had already surpassed their pre-pandemic levels in September, exports from the eurozone were still down 2.6%, and exports from the U.S. down almost 9%.
That pattern partly reflects the fact that China was the first major exporter to suffer from a surge in infections, and emerged from its lockdown just as Europe, the U.S. and much of the rest of the world were entering theirs.
It was therefore in a strong position to meet surging demand for protective medical equipment and electronic devices that helped people work from home in other parts of the world. Economists at UBS estimate that by July, China’s share of world exports had risen by 11%, while the U.S.’s share had fallen by 4% and France’s share by 12%.
“The overall picture is that the pandemic has disrupted the Western Hemisphere far more than the eastern one,” the economists wrote in a note to clients.
The rebound in global trade flows seems set to be faster than in recent recessions. In the wake of the global financial crisis, trade flows took roughly two years to return to the level recorded in September 2008, when Lehman Brothers collapsed.
That suggests countries around the world are experiencing a two-speed rebound: Manufacturing and trade are returning rapidly toward precrisis levels, as households continue to buy imported goods, often supported by government cash. But the recovery has been sluggish for local service providers such as restaurants and movie theaters, which remain hampered by safety measures aimed at containing the virus.
The World Trade Organization last week said its leading indicator of trade flows had returned to its long-term average, indicating that the recovery in trade flows is likely to be sustained. However, it said the rate of growth will likely slow as 2020 draws to a close, as demand for goods that built up during the spring lockdowns has largely been satisfied, while businesses have almost rebuilt their inventories.
Source: Dow Jones