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Global trade volumes slump, marking worst period since financial crisis

Global trade volumes slump, marking worst period since financial crisis

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The chances of a trade deal between the US and China appeared to increase early this week. US sources suggested a “phase one” agreement could be signed before the end of the year after China indicated it would stamp down on intellectual property violations – a key sticking point in negotiations so far. China proposed tougher penalties and compensa-tion for breaches, a move that was welcomed in the US and beyond and helped boost global markets. However, the US also warned China that it would not ignore the ongoing political tensions in Hong Kong. Donald Trump signed two bills this week, one imposing sanctions on anybody implicated in human rights violations and the second banning new export licences for tear gas, rubber bullets and handcuffs being sold to the Hong Kong police force. Beijing said it may re-spond with retaliatory measures.

The trade dispute, which has been ongoing for over 18 months, has weighed heavily on the global economy. Indeed, data released this week in the CPB World Trade Monitor showed the volume of global trade dropped by 1.3% in Sep-tember, reversing the gains made in the last two months when hopes had risen that the impact of the dispute was wan-ing. Global trade fell by 1.1% compared to the same time last year, the fourth consecutive annual contraction and the worst period since the financial crisis. While the US/China dispute has weighed most heavily on trade volumes, many regions have also seen trade volumes fall. Asian economies have seen trade volumes drop as the Chinese economy has slowed, but Europe, too, has been affected. While the report showed Europe’s trade volumes had remained in positive territory, they were still weak by historical standards. Germany is a good example – its export-heavy economy has suffered due to geopolitical uncertainty leading to a lack of business investment, falling exports and consequently slowing GDP growth.

Back in the UK, the latest report on retail sales by the Confederation of British Industry (CBI) showed the reported sales balance, a measure of how many retailers saw sales up rather than down, rose to -3 in November from -10 in October. It is the first improvement in six months and was warmly welcomed by analysts. Anna Leach of the CBI said: "Retailers are entering the festive season with a bit of hope that sales will head up, with the strongest expectations in half a year. Actu-al sales have also stabilised and have nudged above average for the time of year. And employment has stopped failing after three years of decline.” However, she added that “Brexit uncertainties” continued to weigh on investment plans.

This morning, however, a well-respected measure of consumer confidence remained unchanged in November, after fall-ing to a six-year low reading of -14 in October. The GfK consumer confidence index continued to paint a downbeat picture of consumer sentiment while the outlook for the economy over the coming year improved by three points, it is still firmly in negative territory with an index reading of -34. Views about personal finances over the next 12 months were un-changed, with a reading of +1. GfK said the picture had been downbeat since 2016 and consumers were in a “wait and see” mode ahead of the general election and some clarity on Brexit. Finally, Nationwide said house prices rose by more than expected in November, rising to a seven-month high. Prices were up 0.5% on the month, coming after a 0.2% rise in October. On an annual basis, house prices rose 0.8% in the year to November, up from 0.4% in October and ahead of expectations of 0.2% growth. It was the strongest rise since April.

 

 


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For further information, please refer to our conflicts policy. If you invest in currencies other than your own, fluctuations in currency value will mean that the value of your investment will move independently of the underlying asset. The opinions expressed in this document are not necessarily the views held throughout Brewin Dolphin Ltd. The information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness.

 

 

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