The World Bank’s forecast for slowing growth in global trade is landing with a thud across most of the world, but it’s barely being heard in the U.S.
Growth in trade by value will slow to 4.7 percent this year and 6.8 percent in 2013, compared with last year’s 6.6 percent expansion, the bank said.
“With the recent sharp deceleration in the pace of global trade volume growth, world trade is falling once again below its pre-crisis peak volumes,” according to the bank report released Jan. 18.
The slowdown comes as European economies struggle with the debt crisis and developing countries temper production, pulling global economic growth down to 2.5 percent this year and 3.1 percent in 2013. The bank originally anticipated the global economy would grow 3.6 percent each year.
“However, achieving these much weaker outturns is very uncertain,” according to the report. “The downturn in Europe and weaker growth in developing countries raises the risk that the two developments reinforce one another, resulting in an even weaker outcome.”
The bank expects growth in trade volume to slacken to 5.2 percent this year after expanding 6.4 percent in 2011. Volume growth is expected to accelerate 7.2 percent in 2013, but the estimates still fall short of the 8 percent growth in each year the bank predicted in June.
That downgraded forecast echoes less in the U.S., where a growing array of reports from the shipping world and other economic indicators suggest a U.S. economy that struggled last fall is now stable and growing. A majority of economists expect the U.S. economy to expand 2 percent this year, but few expect growth to top 3 percent, according to the National Association of Business Economics.
Numbers from the domestic transportation world show steady, if unspectacular, improvement. This raises the question of how the U.S. economy can seemingly be running on a separate track and whether the roadblocks the bank foresees in trade will hamper domestic growth.
It’s a question, in a larger sense, of whether the globalization that seemed so much a part of the 2008-09 global downturn has been scaled back in an era of retrenchment. If so, that would suggest the U.S. domestic economy is tied more to the narrowing debt of its own consumers than the debt crisis in Europe.
U.S. industrial production in December bounced back at a 0.4 percent year-over-year clip after a November lull, and manufacturing output rose 0.9 percent, the briskest pace in a year. In shipping, domestic shipments inched up 0.7 percent year-over-year in December; rail traffic grew about 1 percent over the first two weeks of the year; and for-hire truck tonnage rose 6 percent in November.
Even the sluggish air cargo industry has shown signs of recovery, with Los Angeles International Airport, North America’s largest gateway for trans-Pacific air cargo, seeing 5 percent growth from October to November. U.S. trade with Canada and Mexico also ratcheted up in recent months, suggesting economic growth in each and a shift of some production from China to south of the border.
Some of the traffic is due to holiday-related restocking and a spurt of shipping that left China before factories there closed on Jan. 23 for two weeks for Lunar New Year celebrations. But considering how lean retailers have kept inventories in 2011, all the growth can’t be written off as a seasonal response.
Part of the reason the U.S. economy has been able to rebound better than its Western counterparts is that U.S. banks, companies and consumers have reduced their debt steadily since the global recession, according to a report by consulting firm McKinsey. That deleveraging, largely through U.S. homeowners defaulting on their mortgages, has allowed the country to right itself far better than the U.K. and other EU members.
None of that will do international shipping business much good, however, if the bank’s outlook in trade turns out the way it says. And that’s if the European debt crisis and the slowdown in developing countries doesn’t worsen further, causing global trade volumes to fall more than 7 percent, the bank said.
The bank expects trade to grow 8 to 10 percent in developing countries over the next two years, while developed countries will see trade expand 5 to 7 percent. But with “high-income countries still accounting for some two-thirds of global trade flows,” trade growth in developed countries will stay tightly tied to demand from developed countries, the bank said.
For global shipping, the real marker may come fairly early. The end of Chinese New Year last year saw tepid economic activity after many workers failed to return to factories. Come Feb. 15, when this year’s celebration ends, fewer still may come back.