Global trade in Q4 of 2010 rose 2.5 percent quarter-over-quarter, a slightly slower pace than we saw in the previous quarter that was due to increased austerity measures in the major economies.
The outlook for the Indian economy improved, thanks to a 9-percent increase in trade volume on a quarter-overquarter basis and the announcement of stimulus packages to prop up economic growth. In the Eurozone, eased labormarket conditions, subdued inflation, and a decline in the household savings rate bode well for consumer spending. The Chinese government's tightening measures helped stabilize China's economy in the fourth quarter. High inventory levels in Chinese trade markets, however, led to a decline in exports of 1 percent on a quarter-over-quarter basis.
In the United States, meanwhile, cautious cutting of debt and building levels of liquidity led to lower domestic spending. A weaker dollar coupled with a rebound in global economies produced a recovery in exports and pushed the United States back into the lead position in the Capgemini Consulting Global Trade Flow Index. Rankings for the top 13 nations are shown in Figure 1.
While global trade continues to recover, the slowing pace was followed by a significant reduction in the growth of container flow in the fourth quarter, as shown in Figure 2. The reduction in Chinese exports during this same period is anticipated to be the biggest factor in this deceleration.
World trade is expected to stabilize in the first quarter of 2011 as government efforts to tighten spending continue across the globe. Despite these measures, the risk of inflation still remains. The continued stability of global trade will depend on the ability of emerging markets to manage the complex trade-off between robust growth and rising inflation as well as the success of monetary policy in taming rising prices.