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Trade analysis: Sluggish 2019, major shake-up in Q1 and endangered recovery in Q2 2020
11 March 2020Tomasz Brodzicki, Ph.D.
Key Points:
The y/y changes in trade data for four out of the main
nine economies of the world show that 2019 was a difficult year
with sluggish growth and contraction; potential recovery has been
destroyed by the outbreak COVID19
The manufacturing PMI new orders index in February 2020
was pointing to contraction for South Korea and Japan (apart from
China and Italy the worst affected countries so far), was close to
50.0 for the US and pointing to growth for Brazil
The increase in the number of cases confirmed could
change the market sentiment for these as well
The newest trade forecasts from IHS Markit GTA Forecasting
(February release) point to an increase in total global trade
volume to 14,465 million metric tons in 2020 and 14,997 million
metric tons in 2021. The estimates for 2020 and 2021 are
significantly lower in comparison to the previous release and
growth rates predicted are now equal to 1.7% and 3.7% (in
comparison to 2.7% and 5.0% forecasted previously)
The real value of global trade is expected to grow to
USD 19,403 billion in 2020 and USD 20, 139 billion in 2021. In
other words, we expect to increase by 1.5% in 2020 and 3.8% in
2021
Our forecasts can be cut further with the inclusion of
the new incoming data; prospects for a global recovery in Q2 are
diminishing fast
The prospects for global trade and the global economy
in 2020 are unfortunately turning. Hopefully, the worst affected
and the source of the outbreak in Q1 2020, China, will be the first
one to bring it under control and boost regional and global
recovery in Q3 & Q4
Introduction
Out of the main nine economies of the world - the US, China
(mainland), EU27, the UK, Japan, South Korea, India, Brazil, and
Russia only four countries the US, Japan, South Korea and Brazil
currently has trade data available for the first months of 2020.
This can be accessed via IHS Markit Global Trade
Atlas.
In the following charts, we show the year-on-year changes in the
nominal value of exports and imports of the countries on a monthly
basis from January 2018. The most recent data is available for
Brazil and includes February 2020. For the remaining three we have
data for January 2020. The data is not very promising. The optimism
visible in 2018 has disappeared.
Trade in 2019
In comparison to the preceding 12 months, 2019 was rather
sluggish. The third and fourth-quarter results for the US and Japan
showed adverse changes y/y. It was much worse for South Korea in
2019 which proved to be very difficult with y/y falls thought the
year. The situation was much more dynamic for Brazil with y/y
increases in exports reported in May and September. The last three
months of the year proved to be difficult. The manufacturing PMI
new export orders (unadjusted) index by IHS Markit was below the
benchmark value of 50.0 for all the analyzed states with the lowest
level for Brazil but showing an improvement in December. It is a
very good predictor of forthcoming changes in trade.
Trade in 2020
Both exports and imports decreased in nominal value y/y in
January 2020 apart from the US. The situation was poor for Japan
but even worse for South Korea. Brazilian exports collapsed y/y in
January which was predicted by the PMI in November of the preceding
year. US imports decreased quite significantly y/y while US exports
behaved rather well - the fall y/y was small.
The PMI values reacted differently to the outbreak of the
COVID19 - the biggest black swan so far of 2020 potentially leading
to a global crises (very probable looking from the current
perspective - as of 9 March 2020 according to the WHO 109,577
confirmed cases, 3,809 deaths and 104 affected; a fall in stock
markets by 15 - 30% on the main markets within a month, outages in
production, major disturbances to global value and logistics
chains, collapse in global tourism, transport flows). The US PMI
new export orders were close to the 50.0 in January 2020, the
Brazilian was above of 55.0 which explains an increase in both
exports and imports in trade data in February 2020, while it fell
for Japan and fell even worse for South Korea. We should thus
observe a y/y fall in exports and imports for the two countries in
the forthcoming months. The PMI for the US and Brazil is only going
to accommodate the inflow of new negative information on the
pandemic escalation of COVID19 in months to come.
Prospects for global trade in 2020
The newest trade forecasts from IHS Markit GTA Forecasting
(February release) point to an increase in total global trade
volume to 14,465 million metric tons in 2020 and 14,997 million
metric tons in 2021. The estimates for 2020 and 2021 are
significantly lower in comparison to the previous release and
growth rates predicted are now equal to 1.7% and 3.7% (in
comparison to 2.7% and 5.0% forecasted previously). The real value
of global trade is expected to grow to USD 19,403 billion in 2020
and USD 20,139 billion in 2021. In other words, we expect to
increase by 1.5% in 2020 and 3.8% in 2021. The forecasts could be
cut further with the inclusion of the new data. The prospects for
global trade and the global economy in 2020 are unfortunately
turning. Hopefully, the worst affected and the source of the
outbreak in Q1 2020 China will be the first one to bring it under
control and boost regional and global recovery in Q3 & Q4.
This column is based on data from Global Trade Atlas from IHS
Markit and its other resources including the PMI.
Posted 11 March 2020 by Tomasz Brodzicki, Principal Economist, GTAS Forecasting, Maritime & Trade, IHS Markit
