Tracking global trade: supply pressures show signs of easing amidst weaker demand

World trade activity edged up last month according to the latest data and supply pressures are finally beginning to show signs of easing.

After stumbling in Q1, global trade is on the rise

Import growth was broad-based across regions, except for US and Africa/Middle East, likely linked to Ukraine war and with that, rising food prices. Export growth was also broad-based across regions, except the US, emerging Asia ex-China and Latin America. Chinese exports saw a sharp rebound in exports in May (13% month-on-month) on the back of easing covid containment measures.

Export and import growth was broadly positive in May

Sources: CPB Netherlands, NatWest Markets

Supply chain pressures are easing

A multitude of data suggest that supply chain pressures started to ease heading into the summer:

  • Shipping costs are moderating: Despite remaining higher than their pre-covid levels, shipping costs ebbed in May and largely continued the trend in June and July.
  • Delivery times are dropping: The US Federal Bank of New York’s Global Supply Chain Pressure Index (GSCPI), which reflects supplier delivery times, has fallen in June and July. The June decline was primarily driven by large drop in China’s suppliers’ deliveries times on the back of less restrictive covid containment policies from early June.
  • Backlogs are being cleared: Recent PMI surveys show a decline in backlogs of work in manufacturing in June and July.

A closer look at the NatWest Markets Regional Supply Chain Index (RSCI) also suggests that supply chain pressures eased in the UK, Europe, China, and the US. But there was a slight intensification of pressures in Japan, probably a delayed reaction to manufacturers being hit by strict curbs in China.

How will weaker global demand affect supply chains?

Forward-looking indicators such as new manufacturing orders suggest weaker global demand in June and July, which might weigh on global trade activity in the months ahead. Real-time shipping data suggests the upward trend in trade should continue. 

But the cost-of-living crisis and rising interest rates are likely to combine to produce a thriftier global consumer. That said, we expect some easing of global inflationary pressures amidst weaker demand and better supply and, consequently, lower shipping costs.

Get in touch

To learn more about the implications of global supply chain pressures for your financial strategy, speak with your NatWest representative or get in touch with us by clicking here.

This article has been prepared for information purposes only, does not constitute an analysis of all potentially material issues and is subject to change at any time without prior notice. NatWest Markets does not undertake to update you of such changes.  It is indicative only and is not binding. Other than as indicated, this article has been prepared on the basis of publicly available information believed to be reliable but no representation, warranty, undertaking or assurance of any kind, express or implied, is made as to the adequacy, accuracy, completeness or reasonableness of the information contained in this article, nor does NatWest Markets accept any obligation to any recipient to update or correct any information contained herein. Views expressed herein are not intended to be and should not be viewed as advice or as a personal recommendation. The views expressed herein may not be objective or independent of the interests of the authors or other NatWest Markets trading desks, who may be active participants in the markets, investments or strategies referred to in this article. NatWest Markets will not act and has not acted as your legal, tax, regulatory, accounting or investment adviser; nor does NatWest Markets owe any fiduciary duties to you in connection with this, and/or any related transaction and no reliance may be placed on NatWest Markets for investment advice or recommendations of any sort. You should make your own independent evaluation of the relevance and adequacy of the information contained in this article and any issues that are of concern to you.

This article does not constitute an offer to buy or sell, or a solicitation of an offer to buy or sell any investment, nor does it constitute an offer to provide any products or services that are capable of acceptance to form a contract. NatWest Markets and each of its respective affiliates accepts no liability whatsoever for any direct, indirect or consequential losses (in contract, tort or otherwise) arising from the use of this material or reliance on the information contained herein. However this shall not restrict, exclude or limit any duty or liability to any person under any applicable laws or regulations of any jurisdiction which may not be lawfully disclaimed.

NatWest Markets Plc. Incorporated and registered in Scotland No. 90312 with limited liability. Registered Office: 36 St Andrew Square, Edinburgh EH2 2YB. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority. NatWest Markets N.V. is incorporated with limited liability in The Netherlands, authorised and supervised by De Nederlandsche Bank, the European Central Bank and the Autoriteit Financiële Markten. It has its seat at Amsterdam, The Netherlands, and is registered in the Commercial Register under number 33002587. Registered Office: Claude Debussylaan 94, Amsterdam, The Netherlands. NatWest Markets Plc is, in certain jurisdictions, an authorised agent of NatWest Markets N.V. and NatWest Markets N.V. is, in certain jurisdictions, an authorised agent of NatWest Markets Plc. NatWest Markets Securities Japan Limited [Kanto Financial Bureau (Kin-sho) No. 202] is authorised and regulated by the Japan Financial Services Agency. Securities business in the United States is conducted through NatWest Markets Securities Inc., a FINRA registered broker-dealer (http://www.finra.org), a SIPC member (www.sipc.org) and a wholly owned indirect subsidiary of NatWest Markets Plc.

Copyright © NatWest Markets Plc. All rights reserved.

scroll to top