ChartBrief #7 CPB Global Trade Trends
This ChartBrief looks at a really useful monthly series on global trade volumes that the CPB (Netherlands Bureau for Economic Policy Analysis) calculates. This is a timely gauge for tracking trends in global export and import growth for the world's economy, and across major regions. As the latest numbers were just released (for July) it's a good opportunity to check out a couple of regional trade trends that I've been keeping an eye on, specifically the divergence between emerging market and advanced economies.
The chart shows annual growth in import volumes (note: volumes, not values - if it were values it would look catastrophic because of the slump in commodity prices) for the world and across emerging market economies and advanced economies. The first point is the black line shows global import demand growth stagnating. This is bad news for any economy that relies on exports for economic growth (which happens to include a number of emerging economies...). The second point to note is the divergences; the first one happened in the post-GFC rebound period when the European debt crisis plunged the region back into recession, emerging markets on the other hand saw improvement, but the gap ultimately closed from both sides.
The second divergence remains underway, the slowdown in emerging markets (because of the 3 Cs of China structural slowing, Currencies i.e. strong US dollar forcing tighter monetary policy/financial conditions, and Commodities crashing and crushing the commodity producing economies) has driven a slump in import demand by emerging economies. The trouble is advanced economies can't produce the same kind of growth as emerging economies, and in a world where emerging economies now make up the dominant part of global GDP this is something worth paying attention to. How the above divergence closes will have important implications for the global economic cyclical outlook.