The DHL Global Trade Barometer (GTB) predicts that world trade will continue to weaken over the next three months, but notes that the rate of decline has surprisingly slowed despite heightened global uncertainties.
“The overall index fell by -1 point to 47, indicating that global trade will further lose momentum over the next three months,” said DHL in a September 26 release. “However, the downward trend has slowed perceptibly since the June update, when the GTB index registered a loss of -8 points.”
Deceleration is spreading across nearly all GTB countries with now five out of seven in a negative territory, it noted. Declining global air trade was the sole trigger by losing -4 points to 45, whereas the index for global ocean trade remained unchanged at 48.
“Worldwide, trade conflicts continue to smolder. Geopolitical tensions are causing uncertainty. Against this backdrop, global trade continues to develop surprisingly well. Although the DHL Global Trade Barometer has further decreased—with an index value of 47 points—world trade is still closer to staying at its high level,” Tim Scharwath, CEO of DHL Global Forwarding, Freight, said.
“This strengthens our conviction that globalization will go on and that logistics will remain its key enabler also in the future.”
On country level, the GTB showed little deviation between the seven constituent economies, namely, US, China, the UK, Germany, Korea, Japan, and India, as well as compared to the previous update in June. All country indexes settled close to 50 points, which is the threshold for growth. Five out of seven countries showed slightly negative growth indicators, recording indexes right below 50.
Eswar S. Prasad, professor of trade policy and economics at Cornell University in Ithaca, New York, USA, commented: “China-U.S. trade tensions have ratcheted up to higher levels and are already affecting global supply chains as businesses adjust to the new reality that both sides are digging in for a long trade war.”
He further observed that the rising trade tensions in other parts of the world, including between Japan and Korea, and the looming prospect of a messy Brexit, “are likely to have an increasingly disruptive effect on world trade volumes.”
The level of uncertainty about macroeconomic growth prospects has driven down business investment around the world, with adverse effects on cross-border trade of machinery and equipment. Household consumption has remained strong in most major economies but the stagnation of trade in consumer durables portends weakening in this key driver of GDP growth.
“Overall, this GTB update confirms the slowdown in global growth and heightens concerns about growth stagnation in the coming months,” Prasad said.
Photo courtesy of DHL