Surprising setback for world trade - ING

A steep decline in Asian import demand has resulted in a 2.1% fall in world trade in April, wiping out the recent trade recovery, explains Raoul Leering, Head of International Trade Analysis at ING. Nevertheless, 2017 stays poised to be a better trade year than 2016, he further adds.

Key Quotes

“Import demand from emerging markets declined 5.2% MoM in April. Latin America and especially emerging Asia are to blame. After roughly 4-5% growth in import demand from emerging Asia fuelled the trade recovery in 1Q and 4Q16, it now shows a demand decline of 6% MoM.”

“We don’t expect this to continue. Monthly trade figures are very erractic and large revisions are common. Secondly, plunging Chinese import demand doesn't relate closely to the course of the Chinese economy. The economy is slowing somewhat, but our forecast of 6.7% growth for 2Q doesn’t indicate further steep falls in import demand.”

“The structural shift away from an export led economy towards an economy that is more driven by growth of domestic spending is a structural trend that will weigh on Chinese import demand for quite some time. But this causes a moderate downward export trend instead of abrupt steep falls. This holds for imports as well since they are closely related to Chinese exports, given the high import intensity of China’s export industry. This leads us to expect a recovery of Chinese import demand in the months to come.”

“Add to this the recovery of American imports in April, the robust growth of Japanese mport demand and the favourable development of European imports, the largest trader in the world, and it is hard to imagine that 2017 will turn out to be a trading year that is as weak as 2016 (1.4% growth).”