Sunday, November 29, 2009

Global Trade Indicating V-Recovery?

Jonathan Lynn of Thompson Reuters reports that global trade volumes rise sharply in third quarter:
World trade volumes grew sharply in the third quarter of this year, data from the Dutch CPB research institute showed on Friday, in a further sign that the global economy is pulling out of crisis.

CPB said trade volumes in the third quarter were 4.3 percent higher than in the second -- the second biggest quarter-on-quarter increase since it started tracking trade flows in 1991, and contrasting with a record 12.3 percent drop in the three months ended February.

The turning point appears to have been this summer, when trade in the three months ended July turned positive on a quarter-on-quarter basis for the first time since May last year, the institute said in its latest World Trade Monitor.

Looking at volatile monthly figures, trade in September grew by a record 5.3 percent after falling 1.5 percent in August, reflecting higher exports and imports in all regions, said the CPB Netherlands Bureau for Economic Policy and Analysis, whose data are used by the European Commission and World Bank.

But the long-term trend remains negative, with average volumes in the 12 months ended August showing a record 14.4 percent drop compared with the previous 12 months.

The World Trade Organisation has forecast that trade will contract by more than 10 percent this year -- the biggest drop since the Great Depression.
The CPB Netherlands Bureau for Economic Policy and Analysis publishes its World Trade Monitor every month. You can read it by clicking here.

Here are the key points:
  • Third quarter: world trade up by 4.3%, the first quarterly increase since the first quarter of 2008.
  • September: world trade up by 5.3% month on month, after a revised decline of 1.5% in August.
  • September: world trade still 14% below its peak of April 2008.

Yanick Desnoyers, Assistant Chief Economist at the National Bank of Canada wrote a Hot Chart, Global Trade Flows Surge in September that was used in the New$ to (Us)e blog:

A key concern in recent months has been that the run-up in markets and commodities was speculative in nature. Fortunately, it is accompanied by a strong resumption in global trade flows. According to data just released by the CPB Bureau of Economic Policy, global volume trade surged 5.3% in September, the biggest increase on record.

Interestingly, the resumption in global trade flows was widespread across regions covered by the CPB. In particular, imports from industrialized countries increased 4% in September and are up a whopping 20% on a quarterly annualized basis.

As today’s Hot Chart shows, this was the first quarterly rise in six quarters. This development is a confirmation that demand from industrialized countries is firming up. With such an improvement in global trade, we believe that global growth will be above trend in 2010, as also suggested by the unprecedented growth of the OECD leading indicator.


We must be wary of these YoY rates of change, considering the hugely depressed comps last year. For example, the Port of LA’s total October traffic was down 8.3% YoY, a big improvement from previous months’ 15-25% drops. Yet at 647,000 TEUs, it compares poorly with October 2007 (735k) or October 2006 (800k).

Also, the US is obviously an important part of the global trade flow. Since the Ports of LA and Long Beach combined handle 40% of the US container traffic, I fail to see where the global recovery comes from given that port traffic remains weak.

My take is that the massive fiscal and monetary stimulus is starting to be felt in the real economy and that in the next few months, economic indicators will likely surprise to the upside, especially in the US. Stay tuned but it's definitely looking like a stronger than anticipated recovery is on its way. Friday's employment report should confirm this.

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