Events in the world economy appear to be leading to a bit of a change in fortunes for world trade. Having grown by 3.2% in 2014, current trade flow projections suggest that global seaborne trade growth in 2015 might not surpass 2.6%. However, a lot of the data available is based on annual projections, and analysis of monthly numbers might tell market watchers something more…
The World’s Shopping
Annual projections for seaborne trade growth provide easy to use demand side indicators. Monthly data can often provide a better understanding of the real dynamics but can be hard to work with, and trade data at that frequency is not always available. Additionally, there is generally a lag of a few months until monthly data is available, reducing its ability to tell us what is happening today. However, monthly data can be particularly helpful in identifying short-term changes, with annual figures failing to show the different trends within the period.
To try to capture this potential, the analysis here uses a ‘basket’ approach. With monthly data on some component trade flows of the world total unavailable, the index is based on the year-on-year growth rate of a basket of monthly trade flows in tonnes for a fairly wide range of key trade flows in the major seaborne trade commodities, including dry bulk, oil and products, gas and containers. In total, 55% of world seaborne trade featured in the basket in 2014. The aggregate here runs as far as June 2015; where a few elements of monthly data were unavailable, the missing values have been estimated based on year to date trends.
Immediately, the index shows that trade growth can be highly volatile on a monthly basis. In June the index stood at 3% but within the previous year it had been as high as 5% and as low as -6%. It also shows that today is largely not nearly as bad as 2009 when the index hit -11%. It also tells us that tricky periods are nothing new since then; in both September 2012 and March 2013 the moving average of the index hit the zero growth mark.
Nevertheless, 1H 2015 clearly saw a sustained period of slower growth, and the index averaged 0%. Both coal and iron trade have come under pressure, and China’s total seaborne dry bulk imports were down by 8%. Box trade expansion has also eased, facing headwinds from the European economy and slowing intra-Asian demand. But, from the moving average, it looks like the bottom of the cycle might have passed, or maybe things have been on the way back down again since April? Growth could have been on a downward trend from late 2014, or with hindsight since mid-2010 (since when the peaks in the index have been getting lower). That would fit well with the view of structural change in China.
Watch The Shopping List
In reality it’s hard to tell, and sometimes the volatility of monthly data can blur the picture too. But in general it helps put changes in better context, and with some hindsight see the turning points. Clearly keen analysts should watch their monthly shopping basket. Have a nice day.