Sustained recovery in global trade – Latest Observations in the Top Ten Economies

Main Observations

• Recovery in trade is strong and sustained with year-on-year growth both in exports and in imports for top ten economies
• Data for March 2021 shows an increase in exports for all top ten states that have already reported the data; exports grew year-on-year from 12.7% for the U.S. up to 33.2% for the UK; only three countries reported data for April 2021 - the year-on-year increase is equal to 31.7% for China, 41.2% for South Korea and 50.5% for Brazil; American and British exports have grown year-on-year for the first time in a year or more; the recovery in exports seems to be already sustained for Brazil and Canada (consistent growth 3rd month in a row)
• In March 2021, imports were growing year-on-year for all top ten economies that have already reported data with year-on-year increases varying from +5.1% for Japan up to +37.6% for China; for April, all reporters are showing significant year-on-year increases: South Korea +33.9%, Brazil +41.1%, and China +42.7%
• Data for imports are by now indicating a sustained recovery which is indicative of growing consumer confidence and increasing internal demand strengthening the likelihood for sustained recovery
• The adjusted PMI NExO readouts for the global manufacturing industry in April 2021 were above the benchmark value of 50.0 points (54.67), which represents an increase of +1.20 points on March readout, and the 3rd month of continuous growth. The readouts for services are for the first time above of 50.0 points benchmark since July 2019 and equal to 50.42

Changes in Trade of the Top Ten Economies

• In January 2021, most top ten economies reported year-on-year growth in the value of exports varying from +3.5% for Brazil to 80.5% for China; the U.S. (-1.1%), EU (-1.6%), Russia (-16.0%), and the UK (-25.8%) reported a year-on-year decline
• In February 2021, most top ten states reported a year-on-year growth in the value of exports varying from 0.1% for Japan to +40.1% for China; with declines reported at this stage by the UK (-0.3% year-on-year), Russia (-1.3%), and the U.S. (-6.1%)
• Data for March 2021 shows an increase in exports for all top ten states that have already reported the data; exports grew year-on-year from 12.7% for the U.S. up to 33.2% for the UK; only three countries reported data for April 2021 - the year-on-year increase is equal to 31.7% for China, 41.2% for South Korea and 50.5% for Brazil
• Chinese exports grew for the 11th month in a row. It is the 6th month in a row for South Korea and the 4th one for Japan, which indicates that the recovery in East Asia is broad and is leading the global recovery; the establishment of the RCEP in 2021 could strengthen the role of the region in the global trade (four countries have already ratified the RCEP Agreement - Thailand, China, Japan & Singapore)
• American and British exports have grown year-on-year for the first time in a year or more; the recovery in exports seems to be already sustained for Brazil and Canada (consistent growth 3rd month in a row)

• In contrast to exports, in all top ten economies imports contracted year-on-year in 2020; the decline varied from -0.4% for China to -23.3% in India; at the same time for most of the states, the contraction in imports was deeper than the contraction in exports
• In January 2021, imports were growing year-on-year in India (+1.9%), South Korea (+3.6%), the U.S. (+4.3%), Russia (+6.0%), and China (+32.6%) and declined in the remaining top ten economies with the largest declines reported year-on-year for Brazil (-10.7%) and the UK (-13.6%)
• In February 2021, imports were growing year-on-year in all countries apart from the UK (-8.7%), with the largest gains in South Korea (+14.1%), Russia (+16.02%), and Japan (+16.5%)
• In March 2021, imports were growing year-on-year for all top ten economies that have already reported data with yoy increases varying from +5.1% for Japan up to +37.6% for China; for April, all reporters are showing significant year-on-year increases South Korea +33.9%, Brazil +41.1%, and China +42.7%
• Data for imports are by now indicating a sustained recovery which is indicative of growing consumer confidence and increasing internal demand strengthening the likelihood for sustained recovery

Prospects for the Forthcoming Months

• The reaction in trade in 2020 was consistent with the escalating global COVID-19 pandemic and steps taken by individual countries/territories in controlling or mitigating it. The situation in 2021 is likely to be similar with the development dependent on the success of mass vaccination programs and the severity of the third and potentially next waves. It is the key differentiator between the four different scenarios of the World Bank's Global Economic Outlook from January 2021 and an element embedded in the baseline macroeconomic scenario of IHS Markit
• The overall impact of COVID-19 on global trade and the global economy will depend on the duration, severity, and spatial distribution of the pandemic and associated severity of containment efforts taken by individual states
• The cumulative number of confirmed cases of COVID-19 globally by 23 May 2021 reached 166.7 million and 3.45 million deaths
• The cumulative number of cases is the largest in Asia (48.9 million), Europe (46.7 million), North America (38.6 million), and South America (27.6 million); Asia become a global leader in reported cases due to the rapid spread of the pandemic in India within a month overtaking Europe and North America
• Looking from the individual country perspective, the cumulative number of cases is the highest in the U.S. (33.1 million), India (26.5 million), Brazil (16.0 million), followed by France (6.0 million), Turkey (5.2 million), Russia (4.9 million), the UK (4.5 million), and Italy (4.2 million).
• In April-May 2021, COVID-19 was spreading the fastest in India (14.5 million cases), Brazil (3.3 million cases), the USA (2.7 million cases), and Turkey (1.9 million cases). The top ten countries affected included France, Argentina, Iran, Columbia, Germany, Italy, and Poland; the highest death toll in April - May 2021, in turn, was observed in India, Brazil, the U.S., Columbia, and Poland
• The two-week moving averages of global new cases and deaths started falling with the vicious variants spreading fast in Brazil and India; the COVID-19 pandemic is ongoing
• The reported number of vaccinations globally reached 1.67 billion, with 391 million people fully vaccinated, which is equivalent to 5.0% of the global population only

• The adjusted PMI new exports orders (PMI NExO) readouts for the global manufacturing industry in April 2021 were above the benchmark value of 50.0 points (54.67, a rise of +1.20 point on the March 2021 readout, and the 3rd month of continuous growth) for seven out of the top ten economies (apart from Canada, the EU & South Korea). The only country to report the PMI NExO below the benchmark value of 50.0 is Russia (49.48); the highest readouts for April are reported for the European Union (61.79), the U.S. (56.16), India (54.93) and South Korea (54.05)

• Both PMI NExO for global manufacturing and global services show a rapid decline and quick V-shape recovery; the readouts for services are for the first time above of 50.0 points benchmark since July 2019 and equal to 50.42
• The most recent real GDP growth forecasts from IHS Markit were published on 18 May 2021 and are based on the baseline scenario of the impact of COVID-19 on the global economy
• We now estimate the contraction of global GDP by 3.6% in 2020, varying between -4.6% for advanced, -1.7% for emerging, and -5.5% for developing economies
• We foresee a global recovery in 2021 with year-on-year real GDP growth rates predicted to reach 5.7% (4.5% in 2022) - adjusted upwards for 2021 by 0.4% compared to April's release. The growth rates are predicted to vary between 5.3% (4.1% in 2022) for advanced, 6.3% (5.2%) for emerging, and 5.0% (4.7%) for developing states
• From a quarterly perspective, both Q3 (-1.5%) and Q4 2020 (-0.4%) proved to bring a continuing global recession in 2020. We predict a global recovery to have taken place already in the Q1 of 2021 (+3.6%), driven mostly by emerging states with the stronger hike in the current Q2 of 2021 (+10.5%). The predicted growth in Q3 & Q4 2021 is equal to 4.9%
• Recovery in China started in Q2 of 2020 following the COVID-19 related contraction in the first quarter. Apart from China (+18.7%), four other economies out of the top ten group are now estimated to have grown in real terms in the first quarter of 2021. These are Brazil (+0.4%), Canada (+0.5%), South Korea (+1.7%), and the U.S. (+0.4%). The UK economy is estimated to have contracted year-on-year in Q1 2021 by 6.1%. The major recovery in all the states is predicted continually for Q2, with the strongest growth predicted for the UK (+21.2%), India (+18.4%), Canada (+13.7%), the U.S. (+12.7%), and the EU (+12.5%)

This column is based on data from IHS Markit Maritime & Trade Global Trade Atlas (GTA) & GTA Forecasting.

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The full version of this article is available on the Connect platform for IHS Markit clients with a subscription to GTA/GTA Forecasting

Please note that China (mainland) reported an aggregated value of trade for January-February 2020 and 2021 - for the year 2020 the data in the GTA database were equally split between the two months, while for 2021 the data were split unequally.

Please note that Brazil has revised data for 2020 affecting the reported growth rates (please be careful not to compare the current GTM Report with prior editions due to significant changes)

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Posted 26 May 2021 by Tomasz Brodzicki, Principal Economist, GTAS Forecasting, Maritime and Trade, IHS Markit