Category Archives: world trade

19/8/20: The VUCA World of World Trade


WTO projections for global merchandise trade by volume:

Let's take a closer look. Optimistic scenario is for a 13% y/y drop in merchandise trade flows. Pessimistic one is for a 30% drop. Swing is 17 percentage points. These are not forecasts, but are uncertain guesses. We are in a VUCA world, folks.

Let's take a second look: COVID19 shock will be permanent (new trend line post-recovery is permanently below old trendline and flatter) with a minor impact post-2022 that will compound over longer period of time. In pessimistic scenario, the impact appears to be also permanent, but seriously severe.

On a linear trend projection, pre-2008 consistent trend would have left us at around 155 index reading in 2022. 2009-2019 trend would have gotten us to around 122 index reading. Optimistic scenario would leave us around 119 in 2022; pessimistic - at around 95. Wait... optimistic gap for COVID19 and GFC impacts to no GFC and no COVID19 impact is... 33 points! One third of 2015 annual level of trade activity. GFC but no-COVID19 gap to pre-2008 is between 36 points and 60 points. 

And the final look: notice 2019 line... it is virtually flat. As WTO notes (see Chart 4 here: there was, basically, no growth in trade in 2019, before the COVID19 hit. 

We are in a VUCA world, folks.

7/2/16: You Gotta Have Some Heart: Baltic Dry Index

As the global growth prospects are apparently and allegedly improving, and the world is busy printing money left right and centre with currency devaluations rounds stimulating the fabled 'competitiveness', the world trade indicators are no longer flashing red. They are, frankly, in a free fall.

Remember Baltic Dry Index? The one that reflects volumes of goods trade flows? And the one that was testing new record lows almost daily around the end of December 2015 through January 2016?

Behold the latest record: Baltic Dry is now below 300

H/T to @soberlook

Time for IMF eagles to fly some forecasting models to tell us things are just going fine at 5% annual global growth click... Yes, yes... that is, to repeat gain, Baltic Dry at its lowest level in its history.

PS: Ireland's exports are, of course, insulated from all this global nonsense... because when times get tougher in the markets, tax optimisation becomes even more important to MNCs.

14/1/16: Two Charts to Sum Up Global Growth Environment

SocGen recently produced some interesting charts looking into 2016 trends. Two caught my eye, as both relate to long running themes covered on this blog throughout 2015.

The first one is that of a decline in global trade flows as the driver for growth. Per SocGen: "Global trade growth has been anchored below its historical average since the Great Recession, offering further evidence of tepid world economic recovery. Decreasing global demand, especially due to slowing emerging markets, weighs on the outlook for world trade."

Another relates to the second drag on global economic progress - debt overhang. SocGen focuses on Emerging Markets’ debt, saying: "Zero interest policies in the developed world have bolstered debt issuance from EM corporates. Only a fraction of EM countries are immune to the current adverse conditions requiring a cautious approach to these markets."

Both do not offer much optimism when it comes to both cyclical (interest rates forward) and structural (capex and demand capacities) drivers for global growth. And both suggest that 2016 is unlikely to be more robust year for the world’s economy than 2015.

30/12/15: Baltic Dry Index: Brick in Search of a Lake’s Bottom

While IMF (belatedly) is warning about the risks of slower global growth, the Baltic Dry Index - a strong instrumental variable for global trade flows - has been sinking and sinking, like a brick searching for the bottom.

Yes, IMF did project back in October WEO that global growth will reach 3.56% in 2016, up on 3.123% in 2015. And that the growth in volume of trade flows will rise form just under 3% to 4.3%, with much of this growth accounted for by increased rate of growth in trade in goods (from 2.9% in 2015 to 4.13% in 2016). But, hey... one day someone will be booking real stuff on foot of IMF forecasts. Until then, good news-bad news from Washington forecasters mean zilch for the Baltic Dry.

3/2/15: Global Trade Growth: More Compression, Whatever About Hope…

As I noted just a couple of days ago, global trade growth is falling off the cliff (see: And euro area's trade growth is leading to the downside:

So no surprise there that the Baltic Dry Index is tumbling. As noted by @moved_average, the index is now down 577 - the level below the crisis peak lows and consistent with those observed back in 1985-1986 lows.

Ugly gets uglier... but you won't spot this in PMIs...

As an aside, in the chart above, perhaps a telling bit is the lack of any positive uplift in euro area trade growth from the introduction of the euro.