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Fears that declining global trade points to economic stagnation are misplaced – not least because world exports are actually growing when measured in non-US dollar terms, according to Paul Jackson, Head of Multi Asset Research at Source, one of Europe’s largest exchange traded product providers.
The latest Uncommon Truths research paper from Source’s Multi-Asset Research team points out that while world exports have been shrinking by around 12% year-on-year (y-o-y) since late 2014 in US dollar terms, when distortions created by currency valuations are taken into account then the picture is very different. Falls in commodity and export prices are also factors. For example:
- If exports are measured in euros rather than in dollars then world exports appear to be growing rather than shrinking. Over the year to August 2015, world exports were down 12% in US dollar terms but were up 5% in Euro terms1
- Global export prices were down around 12% in the year to October 20152 but actual volumes were flat
- China’s December 2015 trade data showed exports were up 2.3% y-o-y when reported in CNY but were down 1.4% when reported in USD
- China’s oil imports were up 9% during 2015, while the amount paid declined 41% (in USD)
Paul Jackson commented: “If I were to switch to a more bearish viewpoint, it would be based on the premise of a decelerating global economy. Global trade data may be a big concern but only if we look at it in nominal terms and, even then, only if we look at it in USD or currencies linked to it.”
1Source: Datastream, IMF and Source Research
2Source: CPB World Trade Monitor
