Global trade levels declined by 1.3 percent in Quarter 3 of 2011 while domestic consumption continued to grow. The Global Trade Flow Index highlights a growing gap between trade levels in mature and emerging markets as well as a switch in position for the United States and China, with China taking over the top spot (Figure 1).
With European countries in the G7 heavily affected by the eurozone debt crisis and constrained by an appreciating euro, trade levels fell by 2 percent. Trade declined by 2 percent quarter-over-quarter in the United States, where a weak dollar dampened foreign market growth, and rising commodity prices further reduced domestic consumption. Japan, still recovering from the effects of the March 2011 earthquake and tsunami, saw trade decline by only 1.6 percent in Q3, an improvement over the 5.7-percent drop at the end of Q2. As a result of these falling trade volumes, growth in container flows also slowed in Q3 (Figure 2).
Emerging markets, meanwhile, did somewhat better. India and China's trade levels grew 1.2 percent and 0.4 percent, respectively. India's rebound from -4.5-percent growth in Q2 was led by demand for cars, petroleum products, and precious stones. Overall, gross domestic product (GDP) in the BRIC countries (Brazil, Russia, India, and China) continues to grow, up between 2.7 and 3.5 percent in Q3. These increases were not directly reflected in global trade flow levels, suggesting that locally manufactured products and services have been displacing some import volumes in these regions.
Moving into Q4 2011, we expect the traditional end-of-year holiday upswing to boost global trade flows. Inflation, driven by high food prices and volatile commodity markets, continues to be a risk for both emerging and developed markets. However, the biggest risk overall continues to be financial market instability related to the eurozone's sovereign debt crisis, followed by ongoing U.S. fiscal imbalances.