Tracking global trade: signs of improvement?

Global trade volumes fell again in November, but there are some encouraging signs that things may be about to get better.

Positive trade winds are beginning to blow

Although global trade is expected to remain fairly subdued in 2023, there’s clear scope for trade volume growth to exceed the 1% that the World Trade Organization has forecast.

The positive developments we’ve seen recently are reflected in the PMI export orders, with the chart below showing how new export orders rebounded in January.

Moving on up: new export orders

Sources: S&P Global, NatWest Markets.

Logistics and transportation bottlenecks are easing

The problems facing global supply chains steadily eased in H2 last year. While there was renewed disruption in November when China implemented new lockdowns, there were improvements in December when its zero-Covid policy ended.

The improvements have carried through into the early stages of 2023, with delivery times falling and shipping costs stabilising close to pre-Covid levels.

Suppliers’ delivery times are shortening

Sources: S&P Global, NatWest Markets.

Trade falls further

November’s 2.5% drop in global trade came hot on the heels of a 1.4% fall in October (although this was revised up from 1.6%), according to figures from CPB Netherlands.

Of some concern is that underlying momentum has deteriorated, with global trade volumes dipping below their long-run trend line. That said, trade is still 6.6% above its pre-Covid level. 

Trade volumes have moved back below their long-term trend

Sources: CPB Netherlands, NatWest Markets.

Zero-Covid hits Asian exports

Export volumes fell in November, driven by drops in China and other advanced Asian economies – presumably linked to China’s zero-Covid policies. While early reports point to further falls in some Asian countries in December, forward-looking surveys suggest new manufacturing export orders will rebound in January. 

Exports out of Asia continues to decline in December

Sources: National Sources, NatWest Markets; Note: Trade in value terms.

The UK bucks the falling import trend

Imports fell everywhere in November – everywhere apart from the UK, that is. Imports to the UK shot up by 6.1% month-on-month, driven by machinery and transport equipment including ships from Finland, cars from China and aircraft from the US.

Export and import growth (%) in November

Sources: CPB Netherlands, NatWest Markets.

Trade balances improving

Disruptions to energy supply and the associated rise in prices pushed major economies’ trade balances into the red last year. However, with energy prices falling back, trade balances had improved somewhat by November.

Trade balances by region

Sources: National Sources, NatWest Markets.

Get in touch

If you’re keen to learn more about how developments around the world are affecting supply chains and the impact they could have on your business, contact your NatWest representative, or get in touch with us here.

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