Trade Weak But Momentum Improving, IP Outlook Soft

CPB global trade fell 2.4% y/y in May after -1% the previous month driven by weakness in both advanced and emerging economies. But export momentum is recovering strongly in the latter and should drive positive growth from there in the months ahead. In line with weakening manufacturing PMIs, global IP fell for the third consecutive month but is still up 1% y/y.

• The Baltic Freight index is signalling that the correction in trade should have troughed but there is no sign yet that it is about to pick up. The IMF revised down its 2023 world trade forecast by 0.4pp to 2% but increased 2024 by 0.2pp to 3.7% in its July forecast update. EM trade was revised down to only 1.5% in 2023 and 4.5% in 2024 whereas OECD was 2.3% and 3.2% (+0.3pp).

Source: MNI - Market News/Refinitiv

• Global exports fell 1.6% y/y in May after -0.2% with advanced economies declining 2.2% and EM -0.7%. Asian exports were weak in May with China down 5.1% y/y, advanced Asia ex Japan -6.5% and emerging Asia ex China -1% y/y. Whereas the US’ rose 2.5% y/y, Latin America 5% and eastern Europe/CIS +9.9%.
• Global IP has been soft in recent months but remains positive in line with metal prices picking up and the global manufacturing PMI around 50. But the PMI fell to 48.8 in June and given the soft European surveys, it could fall again in July. Global IP 3-momentum turned negative in May and so along with subdued wool prices and the chance the global manufacturing PMI may decline again in July after falling to 48.8 in June, output could decline further.

Source: MNI - Market News/Refinitiv/Bloomberg