New export orders in European manufacturing PMIs have been slipping for months and are likely to fall further in May.
New export orders in European manufacturing PMIs have been slipping for months and are likely to fall further in May.

Global Trade Looks Like Synchronized Slowdown

Businesses are concerned about the cost of rising protectionism, yet are optimistic about their international business prospects

Global Trade Looks Like Synchronized Slowdown

While the on-again, off-again threat of an all-in trade war continues to grab the headlines, a more subtle shift is pointing to the brakes being applied the global economy. A number of important measures of international trade have suddenly weakened.
As well, industrial activity as measured by purchasing managers' index surveys have backed up the idea of the so-called synchronized growth spurt is starting to look like a synchronized slowdown, ABC online reported.
Data published by the CPB Netherlands Bureau for Economic Policy Analysis found world trade volumes fell by 1.1% in March. The contraction was broad-based with both emerging and advanced economies reporting falls in export volumes over the month.
On top of that, the CPB also revised up the size of the fall reported in February.
Capital Economics global economist Nikita Shah says alternative measures of world trade have also become even less encouraging. "In recent months, growth in air freight traffic has continued on the downward trend which began in the middle of 2017," she said.
"What's more, the pace at which sea container traffic is expanding has slowed from around 6.5% year-on-year in February to 3.5% in April." Things have also cooled in the industrial heartlands of most advanced economies, the US being one notable exception, she said.

PMIs Soften
New export orders in European manufacturing PMIs have been slipping for months and are likely to fall further in May. Flash, or preliminary, PMIs softened, a result expected to be confirmed with the official releases across major economies this week.
Weaker export orders are a pretty good forward indicator of weaker global trade. Things might be cooling, but Shah said it doesn't mean they are collapsing.
"While the new export orders component of the global manufacturing PMI has fallen sharply, it is still consistent with exports growing by a reasonably strong 3% over the year," she said.
However, negative risks—such as the resumption of trade hostilities between the US and China, as well as the far from smooth renegotiation of North American Free Trade Agreement—far outweigh the potential for positive surprises.
"We doubt that the agreement which the US has apparently reached with China to avert a trade war will mark the end of trade tensions between the two countries," Shah said. "This 'deal' is likely to have little impact on the US-China bilateral trade balance and does little to address concerns over China's protection of intellectual property rights.
"As such, trade tensions will probably resurface in the coming months."
Growth Expected Despite Protectionism
Businesses are concerned about the cost of rising protectionism, yet are optimistic about their international business prospects, according to a new report from HSBC, "Navigator: Now, next and how for business".
Of the 6,000 firms surveyed globally, three in five (61%) think governments are becoming more protective of their domestic economies. This sentiment is strongest among companies in the Middle East and North Africa (70%), and Asia-Pacific (68%). In the US, 61% believe protectionism is on the rise, while in Europe, half (50%) are seeing a rise in protectionist tendencies, Gaetano Sammut, HSBC Malta Country head for trade and supply chain, said.
The majority of firms are looking to regional partners to develop trade opportunities, with almost three quarters (74%) of overseas trade in Europe and Asia-Pacific being conducted within their ‘home’ region. This trend is set to continue with regional ties being prioritized in firms’ expansion plans for the next three to five years.

Darkest Cloud
The threat of trade protectionism is the biggest concern looming over a solid upswing in the global economy, International Monetary Fund Managing Director Christine Lagarde said Friday at the 22nd St. Petersburg International Economic Forum.
The “darkest cloud” on the economic horizon is the “determination of some to actually rock the system that has actually presided over the trade relationships that we have all undertaken and enjoyed to some extent over the last many decades,” said Lagarde.
The IMF chief has repeatedly warned against the risks of a global trade war amid aggressive steps by President Donald Trump to crack down on what he sees as the unfair trading practices of US competitors.  "It would be a great mistake to resort to protectionism and unilateralism. This would be a self-inflicted wound,” Lagarde said, adding, “Nobody wins a trade war.”

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