Confidence builds for strong recovery in global trade

Demand from US and Europe driving recovery, economic data and shipping volumes show

PUBLISHED : Tuesday, 19 August, 2014, 1:27am
UPDATED : Tuesday, 19 August, 2014, 5:19am

Global trade has put in a robust recovery on the back of brisk demand from the US and in part from Europe, according to a raft of indicators and higher business volume seen by shipping and logistics professionals.

After the 2008 crisis when the collapse of Lehman Brothers nearly sank the world economy and the 2010 euro-zone currency pushed the European Union to the brink, trading nations have been enjoying a pickup. Singapore yesterday reported strong growth last month in non-oil domestic and non-electronic exports to China, the United States and the EU.

Of the global picture, Raymond Yeung, senior economist at ANZ Bank, said: "Recent trade data indeed suggests a positive outlook for the second half of this year. Demand from the US is coming back. Overall, the second half is expected to be better than the first half."

The strength of the trade rebound can be gleaned from the fact that second-quarter gross domestic product in the US expanded at a brisk 4 per cent.

The US and the EU registered growth in July non-oil and non-electronic imports from Singapore of 24.7 per cent and 33.8 per cent, respectively, year on year.

China, which said the value of total exports hit a 15-month high last month, imported 8.4 per cent more non-electronic and non-oil goods from the city state during the same time.

Chinese exports to the US and Europe rose 4.3 per cent and 8.6 per cent in the first seven months of this year compared with the year-ago level.

The stronger trade performance has also been felt by businesses that monitor the flow of containerised goods on a daily basis. "Most container shipping lines are reporting high utilisation of vessels and freight rates have also gone up this month since last month. Demand in the third quarter is stronger than the previous one," said Igal Dani, partner at ILP Freight, a Hong Kong-based freight forwarding company that brokers sea, air and road freight cargoes.

The current peak season in container shipping, which runs from the second to the third quarter of the year as Western retailers stock up inventory from Asian manufacturers before the Christmas shopping season, has been the strongest in the five years, according to Alan Murphy, chief operating officer and partner at Seaintel Maritime Analysis, a Copenhagen-based container shipping consultancy.

A similar trend has been seen by Michael Britton, Asia-Pacific managing director at German container carrier Hamburg Süd, which specialises in trade between Asia and Latin America, southern Africa and Australasia.

"Container volumes are growing in all trades and there are reports the Asia-US and Asia-Europe trades are both growing above 5 per cent. These markets are definitely importing from Asia again. Volumes between Asia and Australia and Latin America, by comparison, are still growing but at a much slower pace," he said.

Still, Yeung warned of possible risks in an otherwise optimistic trend. Aside from the political and economic uncertainties over Ukraine, the recent crackdown in China's banking system on commodities import financing could also be a drag for trade in the second-half of 2014, he added.