Due to a decline in both imports and exports of goods and services, global trade levels marginally contracted by 0.26 percent in Q4/2011. The Global Trade Flow Index indicates positive momentum in India and Brazil, primarily due to increasing exports, while China retains its leading position, followed closely by the United States.
In Q4, U.S. trade volume declined by 0.95 percent. Key influences were the euro crisis, weakening business investment, rising commodity prices, and falling real incomes. The European Union continues to be affected by the debt crisis, tallying a decline in total trade of 0.74 percent in Q4/2011. This is mostly due to an appreciated euro and less demand for EU goods and services. Japan saw only a small decrease in trade volumes, primarily caused by a slowdown in industrial activity and reduced demand from the United States and Europe.
Emerging markets continue to post moderate growth in trade volumes, led by Brazil and India with increases of 2.9 and 4.0 percent, respectively. Brazil's commodities exports are being fueled by rising business investments, and India remains consistent with its exports of gems, jewelry, services, and engineered goods combined with a depreciating currency. China's growth has slowed due to tight monetary policy, weakening export demand from the EU, a slowdown in domestic demand for commodity imports, and an appreciating currency.
Moving into Q1/2012, global trade flows are expected to grow, but moderate risk does exist due to the presence of the European sovereign debt crisis, inflationary pressures, and uncertainty around rising oil prices. Higher oil prices will result in a reduction of purchasing power for consumers, impacting growth and trade volumes. In addition, the growing Chinese property bubble will have a significant impact on the world economy, as it will destabilize China's financial system and affect investment there for the long term.