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World trade slows down


Data from the third edition of Capgemini Consulting's Global Trade Flow Index shows a slowing down of growth in world trade as concern about debt in Europe bites.
 
The report tracks trade by quarter, based on the latest available official data from national agencies of the 23 top countries in the global trade arena.
 
Figures revealed growth of 5 per cent in worldwide trade in Q1 2010, slower than over the previous quarter (8.5 per cent), as fear of a sovereign debt crisis affected European economies and the volcanic eruption in Iceland caused considerable trade disruption.
 
The largest rise in trade volumes was in the BRIC countries (Brazil, Russia, India and China), where export volumes rose by as much as 15 percent as compared to the previous quarter (Q4 2009) as governments’ liberalization initiatives and industrial capacity improved.
 
Trade growth remained strongest in Asia and Latin America in Q1 2010 (combined total trade growth of 12.80 per cent compared to Q4 2009), but slightly decreased in the euro area (-0.23 percent compared to Q4 2009), due to high unemployment and substantial fiscal deficits. The trade in European economies in the first quarter of 2010 was negatively affected by the fall in the value of the euro and the rising uncertainty surrounding the Greek bailout.
 
Trade volumes in the US increased by 4.6% in Q1 2010 and trade deficit widened as the value of crude imports hit the highest level in the last 18 months, with barrel prices at an average of almost $79/barrel.
 
The third edition of Capgemini Consulting Global Trade Flow Index figures provide further evidence of the incredible growth of the BRIC economies. All four of the BRIC countries have far outpaced original growth projections. In the first quarter of 2010 alone, compared with Q4 2009, Brazil (15 per cent), Russia (9.1 per cent), India (16 per cent) and China (14.9 per cent) reported total trade growth levels that far exceeded the worldwide average. These growth levels should be noted in the following context:
  • Brazil’s economic growth surged in Q1 2010 on strong domestic demand, witnessing a growth rate of 8 per cent (compared to Q4 2009), while its export market continued to struggle to reach positive growth.
  • India’s economy grew 8.3 per cent quarter-on-quarter, indicating strong economic growth, driven in particular by a huge growth in the export of goods and services.
  • Despite slowing domestic demand, Russia’s total trade growth came from a boom in certain key sector exports like metal & mining, with ferrous metal exports increasing by 26.7 percent and iron ore concentrate exports increasing by 47.5 per cent over the previous quarter.
  • Chinese export of goods gained momentum in Q1 2010 (+13 per cent compared to Q4 2009), while the country is still to make progress toward rebalancing a more consumer-oriented economy.
“The BRIC economies are the biggest driver of global trade flows, with each country having grown stronger than predicted BRIC growth projections. Actual figures for 2009 equate to the same growth levels as originally projected for as much as fourteen years later in Brazil,” said Roy Lenders, vice president supply chain management at Capgemini Consulting.
 
The US, Germany, Australia and Korea in particular enjoy a very healthy trade position with the BRIC economies overall. Japan is also a major trading partner for Brazil and China, but lags behind somewhat on its trade with Russia and India. France, the Netherlands and UK also lag overall on their levels of trade with the BRIC countries.
 
Capgemini Consulting predicts that when final figures for Q2 2010 are collated, we would see a rebound in world trade. With the recent weakness in the euro, fuelled by the Greek debt crisis, European nations may notably struggle to accelerate their exports. In addition, with increasing imports and flow of money within the Chinese economy through government stimulus, China may begin to face inflationary risk that may impact its competitiveness through an increase in its export prices.
 
A full copy of the report can be downloaded from here.

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