How much will Europe’s debt crisis and probable recession hit the US, developing countries and the global economy in general? To gauge this it should be noted that International trade is a particularly sensitive indicator of global economic trends, tending to turn down more than GDP during recessions and to grow more during expansions. Data which may be calculated from the new statistics in the invaluable World Trade Monitor of the Netherlands Bureau for Economic Policy therefore helps gives an indicator of the overall state of the global economy.
The latest published data, up to September, is shown in Figure 1. This shows clearly the downturn in the volume of world trade in the recession commencing in 2000 and the far bigger one following 2008. It also shows that in the recent period world trade has ceased growing significantly but has not declined.
In order to indicate recent trends in greater detail, and to smooth out purely short term fluctuations, Figure 2 charts world trade in the period since 2000 as a three month moving average. It shows that world trade ceased growing rapidly in February 2011 and then relatively stagnated. Arguably there was a small upturn in the most recent period, with world trade 3.3 per cent above its pre-financial crisis maximum in May and 3.8 per cent above in September, but this shift is too small and recent to be considered a definitive indicator of an upturn. It does indicate clearly however that in the most recent period for which data was available there was no tendency to a decline in world trade.
The situation may have deteriorated in October-November, due to the impact of the worsening of the Eurozone debt crisis, but going into this period the trade data is consistent with a slowdown in the international economy but not with a recession.