World trade data for September was released recently, confirming that the growth in world trade is slowing. In September 2011, world trade, measured in Dollars, slowed to an annual growth rate of 4.2%y/y, down from 6.0%y/y in August and well below the 15% achieved in 2010. However, it has to be recognised that 2010 represented a strong recovery year, following the severe global recession in 2008/2009. Consequently, the current slowdown in trade is relative to a record level achieved in 2010.
The slowdown in trade is fairly broad-based, with most regions of the world under pressure. However, the slowdown is more apparent among emerging economies, especially the Asian region, which is struggling to maintain its historical level of exports into the now sluggish developed world (US, Euro-area, Japan). In contrast, exports out of developed economies have held-up a little better, benefiting from the higher growth in emerging economies. This has certainly helped exports out of Germany.
Looking forward, we expect world trade to slow further over the coming months, with the first half of 2012 expected to be especially weak. More positively, because inventory levels are currently fairly low in the US and Euro-area, we don’t think the slowdown in exports out of the Asian region (China) will be as severe as what occurred in 2008/2009. At that time inventory levels were relatively high, which effectively aggravated or exaggerated the fall-off in global industrial production as well as global trade as the world went into 2008/2009 recession..
Since 1992, world trade has averaged an annual growth rate of 6.2%, although there has been a massive divergence in the performance of emerging market exports versus developed market exports. Since 2000, exports out of emerging markets have grown by an annual average rate of 9.1%, while exports out of developed economies have achieved an annual average growth rate of only 3.5%, over the same period. Unsurprisingly, within emerging markets, the Asian region has well out-performed all other areas, with average annual growth of 11.5% since 2000. This is followed by Emerging Europe (+9.1%), Latin America (+4.4%) and Africa/Middle East (+2.6%y/y).
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