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- Jan. 27, 2016 -

 
       
   

Supply Chain Graphic of the Week: Why have Global Trade Volumes Continued to Slow?

Trade Growth Since 2008 has Been Growing Much Slower than Global GDP, in Big Change from the Previous 20 Years - Why?

 
   

By SCDigest Editorial Staff

 
   

One of the somewhat under-reported major trends impacting the supply chain in recent is the signficant slowdown in the growth of global trade.

This has mostly been on a relative basis. From the 1980s through 2007, global trade volumes grew at a rate above global GDP, often by quite a few percentage points.

 

But since the end of the Great Recession, that trend has been flipped, with global trade levels running below world GDP growth by roughly 2-3 percentage points, as shown in the graphic below.

 

What's more, in 2015, global trade growth was actually negative for most of the year, even as GDP was up around 2.5% globally.

 

 

 

Source: Why have Global Trade Volumes Continued to Slow

 

This is a change of significant impact. It is of course at the core of why there is such a capacity glut in the ocean container shipping sector, with carriers having ordered ships in recent years convinced the global trade good times would continue as they had until 2008, when instead that trade has simply stalled. Overcapacity and rock bottom rates have been the result.

 

It also brings into question how effective export driven strategies will be in rallying any given country's economy - or even if multinational companies will indeed be able to find big growth in emerging economies as so many have recently hoped to achieve.

 

What is going on? There are many economic theories, and falling commodity volumes and prices have certainly played a role, both directly and indirectly (lower trade in commosities, less money to spend in developing economies as a result).

 

But the Wall Street observers at Seeking Alpha this week offered an interesting theory, backed by some data. The world's largest and even many developing economies are increasingly becoming service-based. "Services" are much less likely to be traded than are physical goods, of course, so it would makse sense that growth in services as share of world GDP would result in a lowering of trade volumes, at minimum on a relative basis.

 

Whatever the cause, it is clearly happening, in a trend virtually no one was predicting back in 2007.

 

Any Feedback on our Supply Chain Graphic of the Week? Let us know your thoughts at the Feedback section below.

 
   
 
   
 

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