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With more trade data reported by the top 10 economies in the
world we can say more about the evolution of trade in Q2 2020
April 2020 brought about a massive collapse in the value of
exports (year-on-year) with exports falling from 7.6% in Brazil,
19.1% in Japan and 25.5% in South Korea, to 29.0% in the US, 30.3%
in the UK, 36.7% in the EU and by 38.0% in Canada (the worst
affected country), the only major economy to note an increase in
the value of exports was China (+3.5%), for imports, all the major
economies reported a significant decrease year-on-year ranging from
-3.5% in Japan and -13.5% in China to a massive drop of 33.5% in
Canada and -35.1% in the UK suggesting significantly lower demand
for imports in the pandemic-affected countries
The Western hemisphere countries (EU, the UK, the US, and
Canada) seem at this stage to be more adversely affected than other
economies, however, in line with the delayed pandemic curve in
Brazil the situation in this South American economy is
deteriorating
The PMI new exports orders readouts for May were significantly
below of the benchmark value of 50.0 points suggesting a
contraction in the forthcoming months
Year-on-year changes in exports in May 2020 are negative for
all reporting states including China (-3.3%), Brazil (-12.9%),
South Korea (-23.6%), Japan (-26.0%), US (-36.3%) and Canada
(-41.0%), in line with the expectations May 2020 brought about a
deterioration of the situation in most of the states (apart from
South Korea) with the most adverse shifts in comparison to April
2020 in the US, Japan, and China
Year-on-year changes in imports in May 2020 similarly to
exports are negative for all reporting states and range from -10.5%
in Brazil and - 16.4% in China to -25.7% in the US and -39.2% in
the case of Canada, in comparison to April 2020 the situation
deteriorated in all the states apart from Brazil with Japan being
affected the most
The outbreak of COVID-19 proves to be the largest black-swan in
a century with a tremendous impact on the global economy; unless
the situation improves in the second part of the year we will be
dealing with the largest contraction of global trade since the
Second World War far larger than the effects of the global
financial crisis in 2008-09
Q2 2020 is for sure worse than Q1 2020 in terms of the
developments in trade and potentially the worst quarter in trade
statistics so far
Prospects for the forthcoming months
As has been already stressed in the preceding months, the
reaction in trade is consistent with the escalating global COVID-19
pandemic and steps taken by individual countries (or group of
countries) in controlling or mitigating it
The impact on global trade will depend on the duration,
severity and the spatial distribution of the pandemic with several
scenarios of recovery still possible
Unfortunately, the threat of the second wave of the pandemic is
increasing with some states already re-imposing strict overall or
partial (regional) lockdowns (e.g. Israel, Melbourne metropolitan
area in Australia) and some countries still unable to deal
efficiently with the first wave, the potential second wave in
autumn 2020 could have drastic consequences for the global economy
postponing the expected recovery to next year
The prospects for the forthcoming months (before autumn) are a
bit more optimistic, the values of PMI manufacturing new export
orders adjusted for June 2020 are still below the benchmark value
of 50.0 pointing to a contraction, however, they significantly
improved in comparison to April and May 2020 readouts, thus we can
still expect a decline in exports by the top 10 economies
year-on-year but to a smaller extent than in the preceding
months
The index in June 2020 takes the lowest value for South Korea,
Japan and India (below 40.0 points), the readout for the US economy
is above of the value for China, the trend in the PMI allows for
some optimism, with the readouts potentially above 50.0 points for
some of the economies in July 2020 that could be an early sign of
gradual recovery in Q3 2020
The most recent GDP growth forecasts from IHS Markit
Comparative World Overview (published on 15 June 2020) point to a
recession in most of the states throughout 2020 apart from China
mainland (recovery in Q2) and India (recovery in Q3 2020). The
worst affected countries (regions) in Q2 2020 are forecasted to be
the UK, EU, and the US
The recession is forecasted to last to Q1 2021 in most of the
states with a significant upturn in the case of China and India
only (consistently with the forecasts for the remainder of this
year), stronger recovery in real GDP growth rates is expected to
spread to other economies only later in 2021, the forecast,
unfortunately, depends critically on the ability to deal with the
potential second/third waves of the pandemic, uncertainty levels
are still high
Taking into account the multiplier effect between GDP growth
and trade growth in times of crisis exceeding the value of 3.0 we
can expect the contraction of trade in most of the states to last
through 2020 and to take more than two-digit values year-on-year,
the contraction in trade in Q2 2020 could be deeper than we
forecasted in the last release of the GTA Forecasting models; the new
data reported by countries for Q2 2020 will be taken into account
in the forthcoming release of the forecast in August
Main economies of the world and methodological
issues
Top 10 economies by GDP in 2019 include: the US, EU (excluding
the UK), China, Japan, the UK, India, Brazil, South Korea, Canada,
and Russia
They were responsible for 79% of the world GDP in 2019 and 73%
of global exports with most trade carried out within the group
itself
We present year-on-year changes in the value of exports and
imports for available monthly trade data from GTA for the period
from March 2018 to May 2020 in percent
Data edge differs from country to country depending on a given
reporter
For the EU Member states we take into account only EU external
trade that is with non-EU states
Russia and India have not, as for now, reported trade data for
Q2 2020
China reported an aggregated value of trade for
January-February 2020 - the data in the GTA database was equally
split between the two months
