World Trade: Positive end to 2016 cannot prevent the worst score for since 2009

Raoul Leering, Head of International Trade Research at ING, suggests that after a strong bounce back in November 2016, December again showed positive growth for world trade.

Key Quotes

"Nevertheless 2016 is the worst year for trade since the trade collapse in 2009 with growth of only 1.2%. Although the outlook for the short term has improved somewhat due to positive signs on the economy, no strong revival is to be expected."

"According to CPB Netherlands Bureau for Policy Analysis world trade in volumes was 0.5% higher in December 2016 compared to November. The November figure was revised downward to 2.6% (initially + 2.8%)."

"Behind the positive world figure is increasing demand for imports in all regions except the Eurozone that showed a whopping MoM decline of 2.4%. The weak development of Eurozone imports is one of the reasons why advanced economies did not contribute to the 0.6% growth of world import demand during the last quarter of 2016."

"In the US, on the other hand, it seems that businesses and consumers are importing extra in anticipation of more expensive times because of the risk of tariffs being imposed by President Trump. Despite the US import growth of 2% QoQ, advanced economies’ imports declined in the last quarter of 2016 by 0.4%."

"It is import demand from emerging markets that have fired up the engine of world trade in 4Q. Especially emerging Asia showed a recovery with quarterly import growth of 3.1%. Despite the yearend recovery, 2016 has been a very bad year for world trade with a growth rate of only 1.2%, the worst score since the great trade collapse in 2009."

"There are some hopeful signs that the Eurozone economy is gaining momentum and sentiment in the US has improved as well. But the growth of business investments, one of the main drivers of import growth, has yet to show evidence of a strong recovery. Another reason not to expect world trade growth to outpace worldwide GDP growth is that there are no signs that structural drivers have turned the corner. Chinese industry is still shifting towards domestic suppliers to substitute imported intermediates and the rise of protectionism is more likely to accelerate than slow down. The uncertainty around possible import tariffs by the US, also leads to a ‘wait and see’ attitude of companies with regard to offshoring, another driver of trade."

"For 2017, we expect another year in which world trade growth will fail to keep up with the growth of world GDP."