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Global trade still below the 2019 levels, optimism among
top 10 states, however, global PMI NExO fell month-on-month for the
first time since May.
Main Observations
Exports fell year-on-year (yoy) in all the top
economies in Q1 2020; the fall ranged from -1.8% for Canada and
South Korea to -12.8% for India and -13.4% for China; the situation
changed dramatically in Q2 with exports contracting close to 30.0%
or more for India (-36.7%), Canada (-33.1%), Russia (-30.5%) and
the US (-29.8%); China was the only top economy reporting a slight
increase in the value of exports for the Q2 (0.1%
yoy)
Without any doubt, Q2 of 2020 was the worst quarter on
record for global trade, however, the situation in most markets has
been improving consistently since May; Chinese exports, in
particular, are showing a consistent increase over 2019 from May
onwards and this is strengthening (+9.8% yoy already in September
2020), the increase is also present in Chinese imports for the
first time in September (+13.6%); it applies to South Korea as well
(+7.6% in exports and +1.6% in imports)
In October 2020 PMI new export orders' readouts for all
the main economies of the world, apart from the US, are above 50.0
points which is indicative of market optimism; however, PMI NExO
fell for the first time in comparison to September for China, the
US, and the world as a whole which could suggest an incoming change
in market sentiment
The COVID-19 pandemic exerts a negative and
statistically significant impact on global trade from March 2020
onwards and the effect endures
Changes in Exports and Imports of the Top 10
Economies
As we have all the data for the first two quarters of 2020 we
can now report coherently the results for all the analyzed
economies; exports fell yoy in all the economies in the first
quarter 2020, the fall ranged from -1.8% from Canada and South
Korea to -12.8% for India and -13.4% for China (the worst affected
state); the situation changed dramatically in Q2 with exports
contracting close to 30.0% or more for India (-36.7%), Canada
(-33.1%), Russia (-30.5%) and the US (-29.8%); China as the only
top economy reported a slight increase in the value of exports for
Q2 (0.1% yoy)
In July and August 2020, exports were below 2019 values in all
the top economies once again apart from China; China is showing
consistent growth from June 2020 onwards - it went up to 9.8% in
September 2010
In September 2020, apart from China, exports increased yoy also
for South Korea; for the remaining economies the readouts are
negative and range from -2.8% for Japan to -10.0% for Brazil;
however, taking into account the situation in prior months, the
situation in September 2020 was improving in particular in Japan
and South Korea pointing to an accelerated recovery in East
Asia
The only country to have reported data for October 2020 is
Brazil pointing to a yoy decrease of -8.8% which is still an
improvement over September
From a quarterly perspective, imports fell yoy in all the
economies in the first quarter of 2020 apart from Brazil (+4.3%),
the fall ranged from -1.8% for South Korea and Russia to -11.7% for
the UK (that in fact could be related to the impact of Brexit as
well); similarly to exports the situation changed dramatically in
Q2 with imports contracting in all the analyzed top economies yoy
from -9.3% for China to a stunning -52.9% for India; the
contraction in imports exceeded 1/5 in Canada, the UK, EU's
external imports and the US
In September 2020 we observed a rebound in imports yoy for
China (+13.6%) and South Korea (+1.6%) but not for Japan (-15.9%),
still in comparison to prior months the situation improved in all
economies that reported the data
The only country to have reported data for October 2020 is
Brazil pointing to a significant yoy decrease of -27.3%
Prospects for the Forthcoming Months
The reaction in trade in 2020 is consistent with the escalating
global COVID-19 pandemic and steps taken by individual
countries/territories in controlling or mitigating it
The cumulative number of confirmed cases of COVID-19 globally
exceeded 50 million and 1.3 million deaths; the number of new cases
reported daily has been rising again and exceeded 530,000 cases
daily on average - the highest figure from the beginning of the
pandemic. The five countries reporting the highest number of cases
in the past week were the US, France, India, Italy, and the UK
The result of a new analysis by the GTA Forecasting team (https://ihsmarkit.com/research-analysis/empirical-analysis-into-the-impact-of-COVID19-on-global-trade.html)
proves that the impact of COVID-19 pandemic is statistically
significant and adverse, ceteris paribus, on both the exporter's
and importer's side; our models re-estimated on the monthly basis
have shown that the impact became globally negative in March of
2020 and endures
The rapidly escalating indices of the COVID-19 pandemics in
recent weeks could lead to stricter governments' response globally
(usually with 2-3-week delay) and could mark a change in market
sentiment and thus put downward pressure on global trade
As has already been stressed several times the impact
of COVID-19 on global trade and global economy will depend on the
duration, severity, and spatial distribution of the pandemic and
associated containment efforts taken by individual states,
and critically depends on the development and implementation of a
successful vaccine. The breaking news about two separate and
supposedly very effective vaccines that emerged in the last two
weeks is optimistic, however, we should be cautious and remember
that the mass vaccination process will be lengthy and difficult in
itself and could take time to bring the desired effects not
expected to happen in the first half of 2021
The threat of the second wave of the COVID-19 pandemic is
materializing with the number of reported cases and new deaths
increasing in recent weeks in many regions of the world and in
Europe. An increasing number of states are re-imposing strict
overall or partial lockdowns or declaring states of emergency
The threat of the so-called double-hit or even triple-hit
scenario has increased potentially changing the shape of the crisis
from V to W; it should be accommodated in the forthcoming
forecasts
The adjusted manufacturing PMI new exports orders for
manufacturing (PMI NExO) readouts for October 2020 are above 50.0
points for all the top 10 states apart from the US and are pointing
to a global recovery for the second month in a row;
despite the rising concerns over the second wave of the pandemic,
optimism dominates; however, we have to note that the PMI NExO
dropped in value for the two key economies: the US (-1.90 points,
second month in a row) and China (-3.33) over the readouts in
September
The trend in the PMI NExO was clear and consistent within Q2
and Q3 2020 showing a gradual improvement in market confidence from
May onwards; global PMI NExO is at the level of 51.24 in
October 2020 and it fell for the first time globally since May, we
thus could see the first signs of change in global market
sentiment
The real GDP growth forecasts from IHS Markit Comparative World
Overview (published on 17 November 2020) point once again to a
recession in most of the top economies throughout 2020 and Q1 of
2021, apart from China (recovery already in Q2 2020)
This column is based on data from IHS Markit Maritime &
Trade Global Trade Atlas
(GTA).
The full version of this article is available on the
Connect platform for IHS Markit clients with subscription to
GTA/GTA Forecasting.
