Most Read Articles
Global Trade Flow Index: Global trade trending up despite European risks
The intertwined sovereign debt among European countries, together with various banking crises, means the euro zone's political and fiscal future remains in question. Meanwhile, Europe's financial consolidation, high unemployment, and tight credit continue to dampen demand there.
Nevertheless, global trade flows accelerated in Q3/2012, up 1.7 percent from the previous quarter. One reason is that China's trade volumes increased by 4.4 percent in Q3. The Chinese government's efforts to boost growth by spending on infrastructure projects, easing credit conditions, providing tax incentives for consumers to buy automobiles and appliances, and increasing lending to small businesses appear to be contributing factors. Other contributors to the overall trade increase in Q3 included strengthening domestic demand in the United States (where total trade rose 2.1 percent), the relaxation of monetary policy in some middle-income countries, and the easing of financial market tensions in early 2012.
[Figure 1] CapGemini Consulting global trade flow index Enlarge this image
[Figure 2] Container throughput vs. growth in trade Enlarge this image
U.S. gross domestic product (GDP), however, grew by just 0.6 percent in Q3 on a quarter-over-quarter basis. China's GDP grew by 2.8 percent, mainly due to the lagged effect of last year's tight monetary policy. Contrast that with Japan, where GDP growth declined by 0.39 percent. Demand from Europe and China, post-tsunami reconstruction spending, changing monetary policy, and a possible large tax increase could influence whether Japan can restart its growth engine.
World trade is expected to grow in Q4/2012, although the risks of inflation, oil pricing pressures, and Europe's debt crisis remain a concern. Threats to U.S. trade growth include the "contagion" effects of a potential European meltdown; the impact of Europe's liquidity crisis on U.S. monetary policy; and the inability to address sovereign debt problems in both regions, which raises the risk of another global recession. A sharp reduction in the pace of new business formation, coupled with slowly declining unemployment and the expenses related to Hurricane Sandy, created consumer spending uncertainty heading into the holiday sales period.
Join the Discussion
After you comment, click Post. If you're not already logged in, you will be asked to log in or register.
We Want to Hear From You! We invite you to share your thoughts and opinions about this article by sending an e-mail to ?Subject=Letter to the Editor: Quarter 2012: Global Trade Flow Index: Global trade trending up despite European risks"> . We will publish selected readers' comments in future issues of CSCMP's Supply Chain Quarterly. Correspondence may be edited for clarity or for length.