“WTO trade indicator points to slower trade growth into first quarter of 2019. The simultaneous decline of several trade-related indicators should put policy makers on guard for a sharper slowdown should the current trade tensions remain unresolved.” (WTO)

The combination of a slowing world economy together with significant trade barriers between the US and China has triggered a sharp slowdown/reduction in the volume of world trade this year.

Ironically, the decline in world trade coincided with the fact that most of the advanced economies are still experiencing relatively strong job markets and very little price inflation.

An actual decline in global trade volumes began in the fourth quarter of last year and continued into the first quarter of 2019. And as a National Bank Hot Chart illustrates, the recent two quarter drop in world trade was the first such experience since the 2008-09 global recession ended.

As well, the decline in world trade also underscores why forecasts of world growth for this year and next seems to be continuously revised lower.

Historically it is quite unusual for the momentum of world commerce to be so weak as it currently seems to be. There is an obvious linkage between world trade growth and the expansion of global GDP. In the past the volume of world trade has tended to grow between 1.5 to twice as fast as world GDP. But since 2012, trade has only been growing at a rate equal to or below that of GDP.

Leading indicators (including shipper’s projections) continue to point to weaker global economic and trade growth this quarter.

Based on the IMF’s latest projections, the world economy is projected to slow to 3.3% this year and then improve slightly to 3.6% in 2020. On the trade front, the IMF projects only 3.4% growth this year and a 3.9% expansion in 2020.

In other words, the formally comfortable notion that world trade would sharply outpace the world economy seems to no longer hold.  

                                               Source: The WTO