Trade Growth is New Source of Output Weakness

Slumping world trade growth is the latest reason for lowering global growth forecasts. As it releases its twice yearly World Economic Outlook on Tuesday the International Monetary Fund will be joining a succession of international economic organisations warning of the consequences of a decline in global trade growth. The World Trade Organization has recently cut its 2016 forecast from over 3% to just 1.7%. Its 2017 forecast is now 1.8-3.1%. Countries have been able to depend on trade growth to supplement underlying domestic growth. Trade growth has encouraged productivity improvements and the welfare benefits which have come from more efficient allocation of resources globally. Higher trade volumes both encourage and benefit from supply chain efficiencies. With China attempting to source its growth from more domestically oriented activities, trade growth would have been curtailed, in any event. A relatively strong U.S. dollar and recent rises in the yen exchange rate have also constrained trade growth. For the mining industry, the ebbing growth in the trade in goods is also a warning sign that the metal intensity of global output is moderating.