Markets

Tracking global trade: calm before the storm?

Global trade growth was more or less flat in January through March, but our new supply chain index suggests that pressures may continue to mount in some regions.

On the face of it, those figures don’t look especially encouraging. But viewed in the context of past epidemics and crises, they show the relatively muted impact of the Omicron variant on the global trade recovery (see chart below).

 

Global trade recovery after SARS, MERS, the financial crisis, and covid-19

Sources: CPB Netherlands Bureau of Economic Policy, NatWest Markets
Europe gained, emerging Asia and China lost in January

The composition of global trade netted out in January as growth in global imports (+0.5%) was balanced by a drop in exports (-0.5%), but regional differences were notable. Eastern Europe led other regions on trade expansion (5.2% for imports, 3.3% for exports) and the euro area also saw modest trade growth (0.9% for imports and 1.2% exports).

By contrast, emerging Asia and China – which responded to the spread of the Omicron variant with stronger social distancing measures for longer than the West – saw trade decline.

 

Export and Import Growth in January

Sources: CPB Netherlands Bureau of Economic Policy, NatWest Markets. NB: Due to a change in data collection, UK data remains heavily skewed
Shipping costs started easing in March

Global shipping costs eased slightly last month across all major trading routes, but prices still remain elevated compared with pre-pandemic levels – and are expected to stay there for some time as backlogs of unmet orders are cleared. Still, prices remain well below their September 2021 peaks.

 

Global shipping costs across major routes (March)

Sources: Freightos Baltic Container Freight Rate, NatWest Markets; Index: Jan 2020=100
Supply Chain pressures will grow in the months ahead

Our new our Regional Supply Chain Index (RSCI), a composite index that tracks supply chain pressures globally, suggests that most countries saw shortages and supply chain disruption peak towards the end of 2021 and begin to ease at the start of 2022 (with the exception for the US, which saw spikes in February due to labour shortages).

 

The NatWest Markets Regional Supply Chain Index (RSCI) tracks supply chain pressures globally

Sources: National sources, IHS Markit, NatWest Market estimates. NB. Given data’s availability and construction, composite index would be comparable within economies over time, but not strictly comparable between economies.

However, as the war in Ukraine rages on – disrupting supply across a range of sectors – and as covid pushes China to strengthen social distancing rules, supply chains look likely to face significant pressure in the months ahead. 

Get in touch

To learn more about the impact of global geopolitical shifts on supply chains, contact your NatWest representative or get in touch with us here.

We would like to thank Aastha Gupta for her contribution to this article.

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