The volume of goods traded around the world rose late last year for the first time in more than six months as US-China trade tensions eased, but the improvement is likely to be shortlived as the spread of coronavirus hits the global economy.The global goods trade increased by 0.5 per cent in volume terms year-on-year in December according to the CPB world trade monitor compiled by the Netherlands Bureau for Economic Policy Analysis — the first expansion since May. Industrial production grew by 0.5 per cent in the same period, up from a contraction of 0.4 per cent in October. The December trade increase was in “line with the message from our leading trade indicators, which had suggested a modest improvement late last year”, said Adam Slater, an economist at Oxford Economics.December’s expansion was driven by emerging economies; there was a 6 per cent trade increase in emerging Asian countries and 2.5 per cent growth in eastern Europe. By contrast trade volumes continued to contract in the eurozone and the US.
And the signing of the phase one trade agreement between the US and China in January may prove to have been the high point for global trade sentiment — the impact of coronavirus on global demand and supply chains is widely expected to drive a fresh contraction in trade volumes. “The impact of the coronavirus likely to come through during the first quarter of this year, we expect trade to start contracting again,” said Mr Slater.Sentiment indicators such as purchasing managers’ indices reported a fall in new export orders in February across all major economies.Nearly 50 per cent of scheduled shipping lines between Asia and northern Europe have been cancelled since the virus first emerged, according to financial services company ING. This will lower trade volumes throughout the first half of this year, ING said.“The coronavirus is a threat to already-declining world trade,” said Timme Spakman, an analyst at ING. “If 2019 proved to be a tough year for world trade given the effects of the trade war, the spread of the coronavirus threatens to suppress it still further.”
Over the course of 2019, global trade contracted by 0.4 per cent, down from a 3.4 per cent expansion in 2018 and the first contraction since the financial crisis in 2009. The fall in trade volumes last year was geographically widespread with annual drops in exports across emerging economies, as well as Japan, the US and the eurozone.It was coupled with a sharp slowdown in industrial production; annual growth fell to 0.8 per cent, with an outright contraction in advanced economies, down from 3.1 per cent in 2018. This is despite an increase in global output of 3 per cent according to separate IMF data, reflecting the impact on businesses of global trade policy uncertainty.