The world trade boom looks to be over

Abstract

▀ A variety of indicators suggest the world trade boom is over and point to downside risks for our trade forecasts. We present two new synthetic indicators that suggest world trade growth is currently running at a little below 3% y/y but could slow to around 1% y/y by year end. One possible positive is that survey‐based indicators are generally holding up better than ‘harder’ data. ▀ Amongst the most negative signals are those coming from freight‐based indicators and especially slumping German overseas industrial orders. These indicators also have relatively high historic correlations with actual world trade. Two new indicators we look at this time – copper prices and Maersk share prices – also show negative trends and have had leading indicator properties in the recent past. ▀ PMI‐style export surveys from the main exporting economies look more optimistic. But even they point to world trade growth slipping to around 3% y/y by year‐end, compared to our existing forecasts for next year which are closer to 4% growth.