2 September 2009

World trade in a growth spurt

Global indicators are looking positive as world trade volumes rose at the fastest rate in almost a year this June.

Trade volumes increased by 2.5% from May, the largest increase in a single month since July 2008, according to figures compiled by the Netherlands Bureau for Economic Policy Analysis (CPB).

World-trade flows plummeted in the final months of last year, as demand slowed and banks shied away from financing cross-border transactions. The collapse in trade hit the world’s largest exporting economies, such as Japan and Germany.

Up to May, volumes fell by 1.4% from the previous month, according to the CPB. But with volumes picking up in June, the quarter-to-quarter decline for the period between April and June was 0.7%, a much smaller drop than the 11.2% fall recorded in the first quarter, and the 7.1% decline recorded in the fourth quarter of 2008.

The revival in trade flows has been one factor behind the return to growth in a number of large, export-dependent economies. Germany, for much of this decade the world’s largest exporter, recorded economic growth of 0.3% in the second quarter. During the second quarter, Japanese exports grew by 12.3%, after contracting by 28.8% in the first quarter.

The revival of trade flows in June was strong in Latin America, with exports from countries in the region up 14.3%, and imports to countries in the region up 11.9%.

What does all this mean? While it is good news, but to keep it in perspective, it will take some time before trade flows return to their pre-crisis levels.

The CPB said world-trade prices measured in U.S. dollars rose by 1.6% in the second quarter, having fallen sharply in the three previous quarters. It said the rebound was due to a 29.4% increase in energy prices and a 10.6% rise in the prices of other commodities.

For related information, go to www.isa.org/productivity.