World trade volumes rose in May, but the rate of growth is decelerating, consistent with other signs that the global economic expansion is moving into a slower phase.
World trade growth decelerating
By John Kemp
LONDON, July 26 – World trade volumes continued to rise in May, but the rate of growth is decelerating, consistent with other signs that the global economic expansion is moving into a slower phase.
Trade volumes rose by 0.4 per cent in May compared with April, according to the latest data from the Netherlands Bureau for Economic Policy Analysis (“World Trade Monitor”, CPB, July 25).
But volumes in the three months from March to May were just 3.1 per cent higher than in the same period a year earlier, a marked slowdown from year-on-year growth of over 5 per cent in late 2017 and early 2018.
The fastest growth in May was reported in China, Asia, the Middle East and the United States, with volumes in most other regions actually declining during the month.
Volumes on the trans-Pacific routes are likely to have been flattered by the race to beat tariffs announced by the United States and China, which led to an upsurge in container arrivals in May and June.
The impact will probably prove temporary and is likely to unwind in the second half of the year as the tariffs go into effect and the supply chain digests higher than normal inventories after stocking up.
In much of the rest of the world the picture is one of moderating and increasingly unbalanced growth, after the strong synchronised upturn in 2017.
The trade figures are consistent with leading indicators compiled by the Organization for Economic Cooperation and Development (OECD), which show the rate of economic growth peaking in the second half of 2017.
The OECD’s composite indicators show growth accelerating in the United States, China and India in the early months of this year but losing momentum in other countries.
Signs of a moderation in growth are also evident in South Korea’s KOSPI share index, often seen as a leading indicator for world trade growth given the country’s heavy export orientation.
Over the last two decades, the KOPSI 100 share index has been closely correlated with world trade volumes as measured by the Netherlands government statistics.
The 100-share index peaked at the end of 2017 and has been steadily sliding throughout the first seven months of 2018.
KOSPI was up 32 per cent in the 12 months to October 2017, but the annual comparisons have gradually become less favourable and annual growth turned negative in June and July.
If KOSPI remains a good early warning indicator, global trade growth seems likely to slow further over the next few months.
John Kemp is a Reuters market analyst. The views expressed are his own.
(Editing by Adrian Croft)
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