According to CPB Netherlands Bureau for Economic Policy Analysis, world trade experienced an “unprecedented” decline in April as major economies suffered from strict lockdowns due to coronavirus. The volume of global trade in goods dropped by 12.1% MoM in April (the largest monthly contraction since records began in 2000). On a three-month moving average, the index was also down 7.2% in April (largest decline since March 2009) and should contract even more in May.
However, WTO Director‑General, Roberto Azevêdo, noted that “The fall in trade we are now seeing is historically large – in fact, it would be the steepest on record. But there is an important silver lining here: it could have been much worse.” In the details, the latest WTO report highlighted that “In light of available trade data for the second quarter, the April forecast’s pessimistic scenario, which assumed even greater health and economic costs than what had transpired, appears less likely.”
As a matter of fact, latest high frequency data suggest that the worst seems behind us (if there is no second coronavirus wave later this year) with the Baltic Dry Index recovering since late May/early June. Looking at the 20-day moving average, the index could even turn positive on a YoY basis in early July.
The ongoing normalization (reopening) in China, Eurozone, several U.S. states and Asian countries imply that both private investment and household expenditures will mechanically rebound from 3Q20 so that global trade growth will exit almost two years of recession.
Nevertheless, excluding several risks such as a second coronavirus wave, several trade disputes could slow the recovery. First of all, the long-lasting clash between U.S. and China. Despite positive comments from U.S. officials, the latest figures showed that, even if China boosts significantly its purchases of U.S. goods, it will be far from meetings U.S. demands defined in the “phase one” agreement.
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