The global trade slowdown is hitting the EU the hardest, according to new OECD data, as uncertainty over the UK’s exit from the trading bloc and Germany’s industrial downturn add to disruption caused by US-China trade tensions.
Exports from the EU contracted 1.8 per cent in the third quarter compared with the previous three-month period, while imports fell 0.4 per cent, according to figures released on Thursday by the Paris-based organisation.
Exports and imports declined across all major EU economies, with falls of 3.6 per cent and 1.7 per cent respectively in France, and of 0.4 per cent and 1.8 per cent in Germany. In Italy trade dropped for the sixth straight quarter: exports decreased 1.2 per cent and imports slipped 1 per cent.
This was a more severe contraction than the overall 0.7 per cent fall in exports across the G20 group of major economies, which account for about 85 per cent of world output. G20 imports dropped 0.9 per cent in the same period.
Trade in goods waned in the third quarter in nearly 80 per cent of the 50 countries and regions tracked by the OECD, while imports fell in the US and across all the major Asian economies, including China.
Laurence Boone, OECD chief economist, last week warned that high levels of uncertainty on trade policy and geopolitics had resulted in stagnating global trade, which is dragging down economic activity in almost all major economies.
The geographically widespread exports contraction also partially reflects lower oil prices and depreciation in other major currencies against the dollar; the OECD reports its trade data in current dollar values.
Poor trade performance is a particular drag on growth in Europe because many EU economies are relatively open, with a high level of reliance on trade; in Germany trade is equivalent to 87 per cent of gross domestic product, compared with 27 per cent for the US.
“European merchandise trade has been impacted significantly by uncertainty surrounding the trade war and Brexit,” said Timme Spakman, an economist at ING. At the same time “the slowdown of German industry had an impact on European trade, as German producers ran down inventories rather than importing new intermediates”.
A survey published by the European Investment Bank this week showed that more than 70 per cent of businesses in the EU and the US quoted uncertainty as a reason not to invest.
In the UK, exports contracted sharply as a result of Brexit uncertainty and the fall in the value of sterling against the dollar.
In response to the slowdown in trade and growth leading central banks have moved in recent months to ease monetary policy, but this has not had an effect yet, analysts said.
“Policy easing in the US, China and the eurozone is not yet feeding through so all remain a drag on trade growth,” said Adam Slater, lead economist at Oxford Economics.
While there are some signs of stabilisation in forward-looking sentiment indicators, the picture for the near future remains gloomy. Mr Slater added: “Any improvement in the trade picture looks fragile and limited.”