World trade volumes are falling for the first time since the end of the financial crisis in a sign the global economy is only one more major shock away from recession. Trade volumes in the three months between December and February were down 0.8 per cent compared with the same period a year earlier, according to the Netherlands Bureau of Economic Policy Analysis (CPB). Trade is retreating for the first time since the fourth-quarter of 2009, when the economy was still being buffeted by aftershocks from the financial crisis.
South Korea’s KOSPI-100 equity index, dominated by companies heavily exposed to trade, has been signalling a severe slowdown for almost a year now. Hong Kong’s International Airport, the world’s busiest air cargo hub, reported volumes were down more than 5 per cent year-on-year in the first three months of 2019.
And containers handled through the US Port of Long Beach, one of the major transhipment hubs for goods between the United States and Asia, were down more than 7 per cent in the first-quarter.
Inside the United States, truck freight growth slowed, and rail freight fell, in the three months from December through February compared with the same period a year earlier.
Around the world, manufacturers have reported that export orders have been falling for seven months in a row, the longest slowdown since 2012, according to the JPMorgan global purchasing managers’ survey. So far, the loss of momentum has been felt most strongly in manufacturing and transportation, sectors with heavy international exposure, rather than in more domestically focused services.
Bellwethers including 3M Company (diversified manufacturing), Intel (chip manufacturing), Bombardier (rail and aircraft) and UPS (distribution services) all downgraded their outlooks for 2019 on Thursday. Rising interest rates, an appreciating dollar and the escalation of oil prices during 2017 and the first part of 2018 all combined to slow the expansion. But policymakers made the slowdown worse by sowing business uncertainty with the proliferation of tariffs, sanctions and national-security related investment restrictions.
The extended shutdown of parts of the US federal government and Britain’s botched Brexit process added to the confusion and uncertainty among businesses. The result has been a hesitation to make risky long-term commitments and a slowdown in capital investment which is now weighing on global growth. The economy is best thought of as a complex system in which positive and negative feedback mechanisms produce oscillations in the rate of expansion (ranging from boom, to steady growth, weak growth and recession). — Reuters
John Kemp
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