Trade Stats Speak Volumes
Data is normally the analyst’s best friend. Add a dollop of volatility, and it can fast become a foe. Data’s wacky wanderings of late have foiled many a forecast and contributed to an exaggerated, widespread sense of unease. International trade data were no exception, volatile right through the end of 2011. Do they give any hints of where global trade activity is headed this year?
Price movements are part of the turbulence. Although they matter deeply, prices can distort the real flows of goods and services that are occurring. Net of price fluctuations, the latest trade activity compared with the same point last year is still generally robust worldwide, with the exception of Europe. Cumulative numbers for 2011 compared with 2010 are far more impressive, up 6.2 per cent with Central and Eastern Europe, Asia and the US leading the charge. So far, so good.
Given this picture, what do we make of scary press reports and the global fear-factor? Recent worries are in part a reaction to recent figures. Data toward year-end soured considerably, down 3.8 per cent at annual rates in the final quarter, with one month of data pending. This is a significant setback, and has all but snuffed out export momentum heading into the New Year. Built-in growth heading in to 2012 is just 0.3 per cent, compared with 3.9 per cent at the same time last year. Troubling indeed.
Yet not all economies are in the same boat. Latin America boasts strong, double-digit growth in the final quarter that gives its exports a 5.2 per cent push heading into this year. Central and Eastern Europe is not far behind, with 4.4 per cent growth momentum. Even the US had a great finish to the year, and carries 2 per cent growth into 2012. Africa and the Middle East are the same.
In stark contrast, European exports fell at a shocking double-digit annual pace in the final quarter, capping a volatile year and throwing the 2012 outlook into question. Even more influential is the about-face in emerging Asia. Fourth-quarter exports were down by a vastly out-of-character 8.5 per cent, enough to take the current level of exports 2.2 per cent below the 2011 average. Japan saw an unthinkable 14.2 per cent drop at the same time. Without a quick rebound in Asian exports, the forecast for trade activity this year is not good.
Why the sudden change? Asia was pummelled last year by natural disasters. Trade staged a remarkable rebound following Japan’s catastrophe last March, only to be hobbled again by late-year flooding in Thailand. Supply chains in the auto and computing equipment sector were disrupted worldwide, but the effects were greatest in Asia. December data indicate a partial recovery in a number of trade-sensitive economies, but the climb back to average numbers is a long one.
If Japan’s 2011 story is anything to go by, current reconstruction efforts in Thailand will enable a rapid recovery in trade flows. Trade numbers elsewhere – Europe excepted – indicate that demand is still strong, and that momentum can be restored if there are not any further unexpected interruptions.
The bottom line?
Weakness on the trade front is bad news for a world that in recent years has become more dependent on trade as an overall source of growth. On certain fronts, weakness is temporary; on others, it appears more systemic. The former should prevail, promising higher growth.
This commentary is presented for informational purposes only. It is not intended to be a comprehensive or detailed statement on any subject and no representations or warranties, express or implied, are made as to its accuracy, timeliness or completeness. Nothing in this commentary is intended to provide financial, legal, accounting or tax advice nor should it be relied upon. Neither EDC nor the author is liable whatsoever for any loss or damage caused by, or resulting from, any use of or any inaccuracies, errors or omissions in the information provided.
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