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WTO Says Global Trade Will Slow While Free Trade Agreements Abound

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Plus, Caterpillar sees slow growth through 2015, and more!

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MINYANVILLE ORIGINAL

Global Trade Slows...


Last Friday, the World Trade Organization scaled back estimates for world trade growth over the next two years. Forecasts for 2012 trade growth were dropped from 3.7% to 2.5%, while forecasts for 2013 trade growth were lowered by a similar amount, from 5.6% to 4.5%.

A WTO press release underscores the culprits at bay:

The global economy has encountered increasingly strong headwinds since the last WTO Secretariat forecast was issued in April. Output and employment data in the United States have continued to disappoint, while purchasing managers' indices and industrial production figures in China point to slower growth in the world's largest exporter.

More importantly, the European sovereign debt crisis has not abated, making fiscal adjustment in the peripheral euro area economies more painful and stoking volatility. Figures for world trade include trade between EU countries (i.e., EU intra-trade), making them highly sensitive to developments in this region.

Markit's September composite PMI showed that the eurozone's private sector activity shrank by its largest amount since June 2009, despite a German trade surplus.

As for China, HSBC's (NYSE:HBC) Flash PMI for September shows that Chinese manufacturing ticked up slightly from last month's reading, which was the lowest reading in three years, although numbers still indicate a severe contraction in the sector.

The following chart, included in the WTO's press release, gives a clearer picture of how merchandise trade volumes, although recovered from a fatalistic downturn in 2009, have continued to falter, along with aggregated world GDP.

World merchandise trade and GDP, 2008-2013 a

a. Figures for 2012 and 2013 are projections.
b. Average of exports and imports.
(Source: WTO)

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