Recent data from Panjiva showed some modestly promising signs on the global trade front. Let's call the situation slushy, if not thawing. In a post from this past April, Panjiva's Josh Green shared what he considered a slow but steady improvement in overall trade activity. The post highlighted "a 3% increase in the number of global manufacturers shipping to the U.S. market, as well as a 6% increase in the number of U.S. companies receiving waterborne shipments from global manufacturers." Moreover, fewer companies appear to be doing business with what Panjiva terms "watch list" suppliers, whose export data suggests a significant drop off in trade volume.
In summary, Josh notes that the bottom line is "U.S. imports are following their seasonal path -- and perhaps even growing a bit -- suggesting that an economic recovery may be taking hold." But will the trade outlook continue to look positive for the rest of the year? I see a potential number of wildcards that could cause some more roadblocks in the stumbling global trade recovery. These include:
- Currency volatility -- one of the reasons for US export growth for the past twelve months has been a weak US dollar. This has changed, evidenced by the recent economic riots in Greece, not to mention the falling Euro. Strong US exports and imports drive the global sourcing of parts and components from low-cost regions. If our exports slow, so will imports in these areas.
- Global protectionism -- China appears to have graduated from currency manipulation 101 to a broader situation, where it's driving the price of metals and other commodities and semi-finished products by micromanaging import and export tariffs and breaks, not to mention subsidies and loans to internal producers. It's hard to believe that the US and other countries won't respond in kind, triggering trade rhetoric or even new anti-trade policy.
- Inflation -- If inflation spreads from China to the US and Europe, we could see a huge cutback in trade, as the overall economic pace of growth slows or stagnates.
Clearly, we're not out of dangerous trade waters yet. If you're sourcing from China or other developing markets, now would be a great time to double-down on your supply risk management efforts to make sure that if things get worse, you're not left waiting for a container that may or may not show up.
- Jason Busch