The global impact of the earthquake in Japan was seen across manufacturing industries worldwide in the second quarter of 2011. The cutoff of critical Japanese-made components used in the electronics, automotive, and ship-building sectors resulted in a 1-percent reduction in global trade on a quarter-over-quarter basis. Import volumes dropped by 2 percent to 3 percent in countries like the United States, United Kingdom, Canada, France, and Australia.
At the same time that U.S. auto production slowed due to a shortage of Japanese-supplied components, the economy was also facing rising commodity prices. These factors combined to reduce U.S. foreign market growth and similarly affected the majority of the chief economies. In the Eurozone, smaller nations continued to struggle with high unemployment and huge external debt while larger economies showed signs of inflation.
China's export-oriented economy was one of the few that saw foreign market trade growth in Q2. Still, a drop in overall trade-volume growth caused China to slip in the Global Trade Flow Index (Figure 1). India's Q2 outlook was positive due to quarter-over-quarter increases in its trade volume (2 percent) and gross domestic product (3.36 percent).
Global container throughput increased in the second quarter, largely driven by container flows through the Hong Kong and Los Angeles ports (Figure 2). Container throughput should continue to increase in Q3 with the anticipated rebound in world trade driven by a rise in Japanese imports. Further contraction in Japan's industrial production and domestic consumption, however, would slow that growth and impact global trade.
Looking ahead, ongoing U.S. fiscal imbalances risk creating financial market instability worldwide. Additionally, a spike in crude oil prices resulting from an escalation of violence in the Middle East and North Africa could also adversely impact a recovery in global economic activity.