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Global Trade Indicating V-Recovery?
Submitted by Leo Kolivakis, publisher of Pension Pulse.
Jonathan Lynn of Thompson Reuters reports that global trade volumes rise sharply in third quarter:
World
trade volumes grew sharply in the third quarter of this year, data from
the Dutch CPB research institute showed on Friday, in a further sign
that the global economy is pulling out of crisis.
CPB said trade volumes in the third quarter were 4.3 percent higher
than in the second -- the second biggest quarter-on-quarter increase
since it started tracking trade flows in 1991, and contrasting with a
record 12.3 percent drop in the three months ended February.
The
turning point appears to have been this summer, when trade in the three
months ended July turned positive on a quarter-on-quarter basis for the
first time since May last year, the institute said in its latest World
Trade Monitor.
Looking at volatile monthly figures, trade in September grew by a
record 5.3 percent after falling 1.5 percent in August, reflecting
higher exports and imports in all regions, said the CPB Netherlands
Bureau for Economic Policy and Analysis, whose data are used by the
European Commission and World Bank.
But
the long-term trend remains negative, with average volumes in the 12
months ended August showing a record 14.4 percent drop compared with
the previous 12 months.
The
World Trade Organisation has forecast that trade will contract by more
than 10 percent this year -- the biggest drop since the Great
Depression.
The CPB Netherlands Bureau for Economic Policy and Analysis publishes its World Trade Monitor every month. You can read it by clicking here.
Here are the key points:
- Third quarter: world trade up by 4.3%, the first quarterly increase since the first quarter of 2008.
- September: world trade up by 5.3% month on month, after a revised decline of 1.5% in August.
- September: world trade still 14% below its peak of April 2008.
Yanick
Desnoyers, Assistant Chief Economist at the National Bank of Canada
wrote a Hot Chart, Global Trade Flows Surge in September that was
used in the New$ to (Us)e blog:
A
key concern in recent months has been that the run-up in markets and
commodities was speculative in nature. Fortunately, it is accompanied
by a strong resumption in global trade flows. According to data just
released by the CPB Bureau of Economic Policy, global volume trade
surged 5.3% in September, the biggest increase on record.
Interestingly, the resumption in global trade flows was widespread
across regions covered by the CPB. In particular, imports from
industrialized countries increased 4% in September and are up a
whopping 20% on a quarterly annualized basis.
As today’s Hot Chart shows, this was the first quarterly rise in six quarters.
This development is a confirmation that demand from industrialized
countries is firming up. With such an improvement in global trade, we
believe that global growth will be above trend in 2010, as also
suggested by the unprecedented growth of the OECD leading indicator.
We must be wary of these YoY rates of change, considering
the hugely depressed comps last year. For example, the Port of LA’s
total October traffic was down 8.3% YoY, a big improvement from
previous months’ 15-25% drops. Yet at 647,000 TEUs, it compares poorly
with October 2007 (735k) or October 2006 (800k).Also, the US is obviously an important part of the global trade flow. Since
the Ports of LA and Long Beach combined handle 40% of the US container
traffic, I fail to see where the global recovery comes from given that
port traffic remains weak.
My take is that
the massive fiscal and monetary stimulus is starting to be felt in the
real economy and that in the next few months, economic indicators will
likely surprise to the upside, especially in the US. Stay tuned but
it's definitely looking like a stronger than anticipated recovery is on
its way. Friday's employment report should confirm this.
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Amateurish analysis. This a rate of change, first derivative. It has stopped falling and growing modestly, the level shows 20% contraction.
http://2.bp.blogspot.com/_qFiyjwMlP0Y/SxNUeUEHXII/AAAAAAAABO8/piWqjbSrf7...
Look at the level of world trade compared to the Great Depression, third chart, it looks like V only in % increases QoQ, not on the level of trade, 20% contraction, worst than the Great Depression,
http://www.voxeu.org/index.php?q=node/3421
Well, it looks like Tyler picked up the theme.
I'm beginning to think you ignore comments of substance, Leo. A re you just flaming posters here?
as frustrating as Leo can sometimes come off (perhaps it's just me), he has in fact called this market correctly since early this year - check out his posts going back to his days at Naked Capitalism - Note that ECRI has had a similar bullish and V shaped tone.
this clip from CNBC featuring El-Erian on Dubai speaks, at least in part, to what Leo is getting at in terms of the priming of the economic pump (though El Er seems somewhat dubious of the outcome)
*scroll to minute 6:30 where he speaks of the big bet and the "hand off" from Wall Street to Main Street.
http://www.cnbc.com/id/15840232/?video=1343590617&play=1
Leo...let's be candid. Aren't you talking your book?
You mean the $5 billion dollar hedge fund I manage?!? The only long-term positions I have are Chinese solar stocks. I currently do not work at any pension fund, just consulting and trading my small measely portfolio. I call it like I see it and put my own money where my mouth is. If you feel strongly against my analysis, then take the opposite side of the trade. It's your prerogative.
Are the data LK cites seasonally adjusted in any way? There is no indication that they are. If not, this may just be a normal seasonally strong Q3 for trade volumes when compared to Q2. In other words, this pattern may happen every year, and in 2009 it may be enhanced by somewhat larger than normal inventory replenishment in the US consumer goods market. Q3 factors which may occur regularly are shipments of consumer goods to the US from Asia for normally high Q4 purchases. This Q3 may have been boosted by inventory replenishment in the US auto sector that was driven by CFC. Everyone by now generally agrees that CFC was a one-off at best, and more likely pulled purchases forward from 2010 into 2009.
A methodological note on the world trade series of the monitor can be downloaded here.
The CPB does seasonally adjust this data. I quote:
Of course global trade is increasing. Several governments (US, China for example) have massive spending binges which are only now getting into gear. The goods, which have not been available on inventory shelves for a few months now, have to be replenished to fulfill taxpayer financed spending in several countries.
A short term, and unexpectedly strong, uptick is likely. It's very hard to spend $800 trillion and see no effect at all. The problem is getting that effect to extend beyond the fringes of expected growth while keeping inflation in check.
Due to the deflationary situation, inflation will be checked for a period of time. But the cash being printed to finance this growth bubble will only lead to one inevitable outcome - inflation.
My take is that the massive fiscal and monetary stimulus is starting to be felt in the real economy and that in the next few months, economic indicators will likely surprise to the upside, especially in the US. Stay tuned but it's definitely looking like a stronger than anticipated recovery is on its way. Friday's employment report should confirm this.
he said confidently, as if to suggest that he had any more idea about what Friday's employment number will be or what it will ultimately be revised to than anybody else does.
At least you don't sound as sure of yourself as Dennis Kneale back in June. Looks like a dead cat bounce to me. Just cause a medical supply truck arrives at the hospital. That doesn't mean the economy is getting out of ICU.
if printing money is that good for the economy, one wonders why we would ever stop printing no?
A company that we own ran inventories down as low as was possible . They had to order product but only to replenish a lower inventory cycle. Customers are taking longer to pay. The only people I know that are seeing a V are those with an interest in that happening - and that's every pension fund on the planet. People, governments, states, cities are maxed out. Unless you're really advocating money at a minus 10% interest rate to anyone without question then V is just another letter in the alphabet.
On the other hand, the Baltic Dry Index is still headed south... Make of that what you will.
http://www.wikinvest.com/index/Baltic_Dry_Index_-_BDI_%28BALDRY%29
As someone else said, V-shaped? Perhaps. Sustainable? Probably not.
I'm not too sure the baltic dry index is a good indicator anymore given all that extra tonnage coming on the market.
I think you've got the wrong baltic dry index. Try using some grown up data. Or did you do that on purpose?
http://www.bloomberg.com/apps/cbuilder?ticker1=BDIY%3AIND
This may just be a short-term stimulus boost, but the resumption in global trade is encouraging and bodes well for global economic activity.
I think a more apt analysis of global trade and economic recovery would involve analysis of the trade deficit.
Otherwise, the claim of a economic recovery based on global trade increases is akin to saying that one's finances are in perfect order when they take out a newer, bigger, loan to help pay for current debts and to continue to purchase more products. ie. Appearance of economic growth may be just that, and the reality of actual economic wellbeing and a V-shaped recovery would amount to nothing more than a farce.
Although not a user myself, I can imagine that a blast of crack feels really good to an addict while the high lasts. Bummer that not only does the high not last, but has long term deliterious effects. And the longer the addict hits the pipe, the worse off he is when there aint no more crack.
Leo, optimism is a wonderful thing when based on substance, but reality can be a true bitch.
I don't know. One very savvy poster has maintained that one should borrow every single dollar, euro, real, yen---every currency you can, as much as yo can get your arms around.
Max out all credit cards, get all the credit you can get your hands on, forget about paying any of it back, and just disconnect the telephone, change your address, and enjoy the spoils.
There will be so many bankrupts that no one will be able to collect and therefore the whole system will have to be re-invented and those who made off with the most will suffer the least, will in fact prosper.
This makes sense in a world gone insane, where those financial institutions managed to enrich all their top guys
and bankrupted their firms, where 100 X leverage was used to pay themselves billions insuring the future of themselves and their families for generations to come.
Audacious, crazy, wild, and over the top. But I'm beginning to see the logic in it.