FXStreet (Delhi) – Raoul Leering, Head of International Trade Research at ING, notes that the world trade shrank 0.1% (MoM) in November after a (revised) increase of 0.6% in October, according to latest data release by the Netherlands Bureau for Policy Analysis (CPB).
Key Quotes
“The less volatile three months average growth (momentum) was 0.8% in November, 0.9 percentage points lower than the (revised) 1.7% in October. This is partly due to an unfavorable base effect; the very low import figure for May is no longer part of the base of comparison. But it also shows that the recovery of trade at the start of the summer in 2015 has become stuck.
ING expects the growth rate to increase cautiously this year. Even if trade hardly grows, as long as it will not shrink like during the first five months of 2015, the growth figures will be better this year than in 2015. We reiterate our expectation that world trade will grow 20% faster than world GDP this year, leading to a forecast of worldwide trade growth of 3.2% in 2016. For 2015 trade growth will end up around 2%.
Downside risks surrounding our forecast for 2016 have increased. Industrial production growth in the Eurozone, which correlates strongly with import demand, shows no sign of the earlier expected acceleration.
The ongoing discrepancy that emerged in 2015 between moderately positive Purchasing Managers Index (PMI) survey results and the negative realized production data for industry means that we must be careful interpreting the PMI- data as leading indicator for Eurozone industrial production. That said, the disappointing Eurozone PMI for January still diminishes the chances of an acceleration of industry growth.
In China, construction – a sector that contributes significantly to import demand- grew in 4Q, but industrial growth and growth of investment demand were down in December, which does not bode well for imports. On the other hand the volume of commodity imports has risen in December, which could indicate that the slowdown in economic activity in the import sensitive industry and/ or construction is not pushing through. Our take away from these opposite signals is that it is- at least- too early to state that the slowdown in industrial growth in China is behind us.
In the US the performance of industry is still very weak and for commodity exporting countries the recent bout of downward pressure on prices and thereby their incomes, reduces the chance that they will be importing much more in 2016 than last year. All in all, it is difficult to envisage a more than cautious acceleration of world trade growth.”
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