The WTO on Monday warned that the trend in global trade remains sluggish as tensions persist despite some progress on a resolution to the spat between the US and China.
The body’s Goods Trade Barometer (a real-time gauge of the trajectory of world merchandise trade volumes) improved marginally from August, but still sits “well below” the baseline value, signaling below-average growth, the organization said Monday, in a press release warning that tensions are “taking their toll”.
In September, the WTO slashed their forecast for trade growth this year to just 1.2%, a full percentage point below April’s projection. Around the same time, the OECD decried the trade war as “insidious” in the course of downgrading their outlook. In October, the IMF followed up, cutting its global growth projection for the fifth time in a year.
“According to the latest WTO quarterly trade volume statistics, merchandise trade rose by only 0.2% year-on-year in the second quarter of 2019, compared with 3.5% in the same quarter of last year”, the full report reads.
Although a few of the main barometer’s component indices have stabilized, several others have tanked further, in a sign that persistent frictions and animosity are weighing more heavily on some sectors than others.
For example, the WTO notes that “indices for air freight (93.0), electronic components (88.2), and raw materials (91.4) were all on a downward trajectory well below-trend [with] electronic components trad[ing] weakest of all, possibly reflecting recent tariff hikes affecting the sector”.
The pulse of the semi sector has undulated with the ebb and flow of the trade war, and that’s put a lot of pressure on sensitive regional economies, like global demand bellwethers South Korea and Singapore.
On Monday, for example, Singapore said non-oil domestic exports fell 12.3% in October YoY. That was worse than the 10% drop economists were looking for.
(Enterprise Singapore)
Enterprise Singapore blamed the high base a year ago in non-electronics (and specifically pharma). Nevertheless, the picture doesn’t look pretty.
Shipments of electronics declined by 16.4% last month, a somewhat dubious encore to September’s 24.8% contraction. ICs, PCs and telecommunications equipment dove by 17.2%, 31.3% and 15.7% respectively. Shipments to Japan plunged nearly 40%.
(Enterprise Singapore)
All in all, it was the eighth consecutive month in contraction for non-oil exports.
This seems like an opportune time to re-run the following straightforward assessment from OECD chief economist Laurence Boone:
The proliferation of tariffs and subsidies and the increasing unpredictability of trade policies have destroyed growth in international trade.
Any questions?
Apparently not, because everybody is still buying stocks.
