The Slowdown In Global Trade In 6 Charts by Eric Bush, CFA, Gavekal Capital
The last two US recessions have severely damaged the growth rate in global trade. In each case, the trend growth rate of trade since 1991 (which is when the CPB World Trade Monitor data begins) was effectively cut by at least a percent. Emerging markets have helped to keep global trade afloat especially relative to developed markets, however, even in emerging markets we have seen a step down in the growth rate of trade.
In each of the charts, we index import or export data at 100 starting on 1/31/1991. We then plot growth trend lines as an easy way of identifying a pick up or slow down in trade. For example, world imports grew at growth rate slightly above 7% from 1991 to 2000. By the end of the technology stock bust, trend growth had fallen to about 6%. World imports again picked up steam starting in 2003 and nearly reached a 7% growth rate before the global financial crisis. Since the financial crisis, however, trend growth since 1991 has fallen to nearly 5%. The trajectory in world exports is nearly identical to that of world imports.
Not surprisingly, the trend growth rate in emerging market trade has managed to maintain a higher growth rate than the world as a whole. EM imports grew at over a 9% trend growth rate until the Asian Financial Crisis hit in 1997. The trend growth rate fell by 2% into the beginning of 1999. EM imports weathered the 2001 US recession fairly well and by 2008 the trend growth rate again surpassed 9%. Since the global financial crisis, the trend growth rate since 1991 has once again dropped below 8% and since 6/30/2009 the trend growth rate in EM imports has dropped below 7%. EM exports have consistently grown slightly less than EM imports. However, once again the trajectory of export growth is very similar to the trajectory import growth.
Lastly, we have developed world trade. The trend growth rate in developed world imports has nearly halved since 2000. From 1991 – 2000, trend growth of imports was 7%. After the 2001 recession, trend growth fell below 6% and has never surpassed 6% let alone reached 7%. After the global financial crisis, trend growth again took a step down and fell below 4%. Trend growth in developed world imports since 1991 currently sits below 4%.
