Quarterly Outlook
Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?
John J. Hardy
Global Head of Macro Strategy
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Chart of the Week: CPB World Trade Volume
Christopher Dembik
Head of Macroeconomic Research
Summary: The latest CPB figures confirm there is no real improvement in sight for global trade in the short term.
Global trade recession is doomed to continue to weight negatively on economic activity for a prolonged period, as shown by the latest CPB figures. It was out at minus 0.8% year-on-year in July versus minus 1.7% in June. The month-on-month rebound was quite strong, reaching 1.9% in July, but it is likely to be short-lived considering the evolution of the three-month moving average and of most up-to-date Asian surveys.
The three-month moving average keeps moving downward, at minus 0.8% YoY in July, which is its lowest level since the Global Financial Crisis. On the top of that, Asian trade indicators are still sending warning signal about the economy.
If we look at South Korea, whose economy is 50% export driven, we have a bunch of indicators confirming the slowdown will last longer than most expected at the beginning of the year. Preliminary export data for the month of October, covering the period from the 1st to the 10th, are very worrying. The drop reached minus 8.5% YoY, and it is expected to get worse in the rest of the month. So far, South Korean’s exports went through eleven straight months of contraction.
Global trade will be a considerable drag on global growth this year and probably next year as China will continue to import less and trade war risks remain elevated despite “phase 1” deal’s finalization last week in Washington.
The next release of the CPB World Trade Monitor is scheduled for 25 October 2019.
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