A new report, published by S&P Global yesterday (6 August), found that that “global trade conditions continue to deteriorate into the second half of 2024”, as new export orders declined in July for a second straight month.
Manufacturing hit by Red Sea crisis
Manufacturing is at the heart of the decline, with the Red Sea crisis driving delivery times to rise at their quickest rate since January.
The S&P report cites evidence from companies who have blamed shipping delays for longer delivery times by manufacturers:
“This clearly affected export demand, with the PMI Comment Tracker data showing a sharp rise in instances where falling goods exports were linked to shipping delays in July.
“Therefore, while weakness in underlying demand conditions partially dampened export orders, it was also the rise in shipping constraints that played a part, which we will be monitoring in the coming months.”
Regional variation
A decline in trade conditions over the last month took place in developed economies, “though the rate of reduction remained modest and unchanged from June”. The EU, Canada and Japan all saw declines in overall export orders.
Manufacturing export orders saw a particularly strong rate of decline, dipping at an even faster rate in July than the previous two months of contraction. Service exports in developed economies stabilised in July, however, following their own decline in the two months prior.
Developing markets, on the other hand, enjoyed continued increases. The report details that “a slight acceleration in overall export business growth for emerging markets was supported by faster manufacturing export orders expansion”.
It also notes, however, that a recent increase in services exports in developing countries hit its “softest pace in four months”. That increase nevertheless continues to outpace manufacturing growth in these regions.
Star performers
The data also found that India remained the world’s fastest-growing exporter for the seventeenth consecutive month. The Asian nation’s export orders grew at their second-fastest rate in 13 years.
India was followed by Brazil, which has benefitted from a depreciation in its currency reducing the costs of importing its goods. It enjoyed growing export orders from both Asia and the US.
Following India and Brazil were South Korea and mainland China, which both experienced “more muted growth”.
UK optimism?
While nations like India enjoy sustained growth and increasing exports, the Guardian reports today that the UK’s National Institute of Economic and Social Research (Niesr) has predicted a more modest acceleration in the growth of the UK economy.
Predicting that interest rates may not fall as quickly as hoped by some, the organisation suggested that the overall rate of growth would remain modest but that this would lead the Bank of England to remain cautious about the risk of a return to higher rates of inflation.
Niesr suggested that interest rates would fall relatively slowly over the course of next year, going from 5% to 4.6% in 2025 before dropping to 4.1% in 2026 and 3.1% in 2028.
Niesr’s director, Jagjit Chadha, suggested that higher government investment would be required to achieve more significant growth, as would “a great deal of patience”.