Global exports show no signs of picking up

Global trends show that unlike capital flows, which have shown much buoyancy, trade remains sluggish with volumes continuing its downward spiral. Global exports of goods & services which declined by 4% in the fourth quarter of 2009 has shrunk by 14% each in the first two quarters of 2009.

The scenario is equally bad in both the developed and developing countries as indicated by the trends in the OECD countries and Brics countries comprising Brazil, Russia, India, China and South Africa. Most recent numbers till July 2009 show that countries in both groups seem stuck in the trough phase and with no signs of an immediate resurgence.

But a major positive change is the decline in the global trade imbalances. The trade deficit of the OECD countries fell from a high of $88.8 billion in August 2008 to just about $28 billion in June 2008. The trends in decline of trade deficit was, however, slower in the case of the US where it shrunk from a peak level of $72.7 billion in August 2008 to a low of $37.2 billion in May 2009 and then slowly went up to $42.7 billion in July 2009. In contrast, the Chinese trade surplus, which peaked at a high of $40.1 billion in January 2009 slumped to $9.4 billion by June 2009 and has now slowly moved up to $16.4 billion by August 2009.

The continued sharp deterioration in the export trade is best brought out by the numbers emerging from the OECD countries and the Brics. Trends in dollar value of exports show that in both the OECD countries and the Brics, exports continue to shrink close to a third. Surprisingly, though the export deceleration has slowed down in the OECD countries in the recent months, the scenario seems to have worsened in the Brics.

The scenario in the developed countries is best highlighted by the merchandise trends in 30 OECD countries. In just one month after the crisis hit the global economy in September 2008, the number of OECD countries registering positive growth trends went down from 29 in September 2008 to 7 in October. By January 2009 there was no single OECD country showing a positive growth in exports and the scenario remain unchanged till today.

In contrast the number of OECD countries registering negative export growth shot up from the value of one in September 2008 to 23 in October and further to 30 in January 2009, with no signs of any significant improvement since then. The intensity of the export slowdown is indicated by the number of countries registering an export slump of more than 20%. Their numbers have gone up from zero in October to 26 by January and July 2009.

Important OECD countries with the highest shrinkage in exports in July 2009 included South Korea (21.8%), US (26%), France (26%), Germany (28.3%), Japan (29.3%), United Kingdom (31.9%), Sweden (37.2%), Canada (40.7%) and Italy (68.7%).

The shrinkage in Brics exports was not as immediate as in the OECD countries. Numbers for October 2008 indicate that only India took an early hit among the five Brics with its exports declining by 11.5%. Other Brics continued to register positive growth in the month. Figures for January 2009 show that impact of the slowdown varied sharply across the five countries with oil-exporting Russia taking the worst hit with goods exports shrinking by 46.6%, which was three times the 16.2% fall in exports in China. And more recent figures for July show that India has come on top with its export shrinkage declining to just 19.4%, which was slightly better than the 23.2% decline registered by China and much better than the 45% decline in Russia, which continue to be the worst-hit country among the Brics.

The figures on growth of merchandise imports also show no significant improvement in either the OECD or the Brics. Merchandise imports into the OECD countries, which peaked close to a trillion dollars in July 2009, slumped by more than a third to a low of $618 billion in May 2009. However, the trend seems to have been reversed with merchandise imports slowly picking up to $637 billion in the next month.

The slump in the OECD countries seems to reflect the trends in the US whose merchandise imports have come down from a peak level of $195 billion in July 2008 to a low of $119 billion in May 2009, and then moved up slowly to $129 billion by July 2009. The pick up in imports from other major OECD economies like Germany, Japan and France has been much lower than anticipated.

The slump in merchandise imports to the Brics has been equally sharp with their value shrinking from a peak level of $183 billion in August 2008 to a low of $109 billion by January 2009. Though the numbers fluctuated a little in the later months it has now improved to $132 billion by July 2009.

Numbers for July 2009 show that as in the case of exports Russia was the most affected Brics country with its merchandise imports shrinking by as much as 45%, South Africa was another laggard with imports falling by 43%, followed by India whose imports shrunk by 37%. Relatively better off was Brazil with its imports down by 33.5%. Among Brics only China seems to be heading towards positive territory with its import shrinkage rapidly declining from a high of 41.5% in January 2009 to just 16% in July.