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Sharp September drop in trade dashes world recovery hopes

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Via Financial Times

World trade contracted sharply in September, dashing hopes that the global downturn that has been weighing on exporters had bottomed out.

The volume of global trade dropped by 1.3 per cent in September compared to the previous month, after a 0.5 per cent expansion in August, according to data from the CPB World Trade Monitor.

September’s fall reverses the gains made in the previous two months, which had raised expectations that the worst of the disruption caused by the global trade war has passed.

“While news about the negotiations between the US and China is mixed at best, trade remains subdued,” said Timme Spakman, an economist at ING. 

Compared to the same month last year, global trade contracted by 1.1 per cent in September, marking the fourth consecutive year-on-year contraction and the longest period of falling trade since the financial crisis in 2009, according to the CPB Monitor.

Column chart of Annual % change showing Global trade has contracted

The US and China were the largest drag on international trade volumes, largely reflecting the two-year-long trade war between the world’s two biggest economies. US import volumes fell by 2.1 per cent in September compared to the previous month. In China, imports were down by 6.9 per cent.

Bilateral trade between the US and China has been contracting at double-digit rates since the end of last year, with goods being the most affected as they have been targeted with tariffs by both sides. 

In September the value of US soyabean exports — which faces retaliatory Chinese import tariffs — dropped by $1bn compared to the previous month, the main driver of the $1.8bn fall in total US exports, according to separate US official data. 

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However the loss of trade momentum has been widespread across goods and countries as policy uncertainty disrupted the global supply chain and was reflected in lower business investment. In September trade volumes in emerging Asian nations other than China were down 3.3 per cent compared to the same month last year. 

“Due to regional and global value chains, the fall in Chinese imports also resulted in a significant decline in import demand among other Asian countries,” said Mr Spakman.

The eurozone showed more resilience with positive, but weak, September trade data. 

As the weakness in global trade continues, a rebound next year is not now on the cards, economists warn.

“While we think that global trade growth is likely to stabilise in the latter part of 2019, we see little likelihood of a substantial pick-up in trade growth next year, even if US-China trade tensions dissipate,” said Mr May.

CPB trade data uses national value trade statistics for goods to create national, regional and global indices of trade adjusted by price changes.

The organisation also standardises industrial production data. Its global industrial production statistics presented a marginally more upbeat picture, with a 0.5 per cent month-on-month expansion in September, building on a 0.1 per cent increase in August.

However the growth was exclusively driven by Asian economies, with most other industrial regions continuing to contract. 

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