World trade wipes out losses of previous months, but too early to cheer

Global trade bounced back strongly in November 2016 after a weak performance during the first ten months of last year. But monthly data on world trade are very erratic and subject to large revisions, so it is too early to cheer. Also because structural drivers of trade point in the opposite direction according Raoul Leering Head of International Trade Research.

According to CPB Netherlands Bureau for Policy Analysis world trade in volumes was 2.8% higher in November compared to October. The October figure was revised upward to -0.9% (initially -1.1%).

Behind the revival is a recovery of import demand in emerging markets. Especially emerging Asia shows a whopping growth of 5.2% MoM. Other emerging regions, with the exception of Central- and Eastern Europe, saw a recovery of demand for imports as well. In advanced economies, the recovery is more moderate (0.8%).

Because of the high volatility of the monthly trade data, the three month growth figure (momentum) tells us more about the underlying trend. It came down from 0.7% to 0.5% in November, which shows that it is too early to cheer. World trade in 2016 is still heading for a bad score with growth only 1.1% higher during the first eleven months than in the same period in 2015.

Despite the revival in November, serious doubts remain about the growth potential in the near future. Support from the economic cycle is limited and the structural drivers of trade don’t look very good. Chinese industry is still shifting towards domestic suppliers to substitute imported intermediates. Protectionism has been on the rise since 2013 and the risk is that this will increase steeply if Trump does not get what he wants in the (re) negotiations with Nafta- partners and China.