Wednesday, July 28, 2010

Global Economy's Remarkable Recovery: World Trade Projected to Expand by 8.1% This Year

Excerpts from a bullish report on world trade and global shipping from IHS Global Insight (Press Release here and Executive Summary here):

"Global trade along virtually every trade route has shown a remarkable recovery from the 2007–09 recession.  Despite some commentators' views that global trade volumes would not recover to their earlier levels before 2013 at the earliest, we are seeing what appears to be a sustained recovery in trade since late 2009 through at least the middle of 2010.

International trade volumes are forecasted to increase in line with the recovery in demand. World trade by all modes (airborne, seaborne, and overland) declined 7.2% in 2009. As the economy improves through the middle of 2010, total world trade is forecasted to grow 8.1%, followed by 6.9% growth in 2011.

Containerized trade volumes at the global level are forecast to reach nearly 10.0 percent, with a slightly stronger recovery – 10.6 percent -- on the mainline East-West trade lanes in 2010, before slowing over the next two years. While trade growth is projected into 2011 and beyond, the pace is expected to be slower than in 2010. However, 2010 and 2011 will be banner years relative to the hardship the container industry faced in 2008 and 2009 with 3% and -8% growth on TEU volumes, respectively.

Dry bulk commodity shipment tonnage, which includes grain, iron ore, and coal, will increase 10.3 percent in 2010 and 8.7 percent in 2011."


At 7/28/2010 6:03 PM, Blogger Benjamin Cole said...

Let's see: China expanded their money supply by 25 percent, went crazy on fiscal stimulus, and their econmoy is growing in double digits and their inflation is--horrors!--three percent.

Horrors! They are doomed!

Biy, are they going be sorry they are not enduring a recession.

Like BB King sang, "You'll Be Sorry Someday."

Our Fed is made up of pointy-headed accountants.

At 7/28/2010 7:20 PM, Blogger PeakTrader said...

When Americans Stop Shopping, the World Suffers

Total imports fell from $2.538 trillion in 2008 to $1.947 trillion in 2009 -- a decline of almost $600 billion. This means the nations that export goods to the U.S. received $600 billion less from the U.S., and that's a lot of sales to lose.

Unsurprisingly, that decline in sales to the U.S. is one reason for a slow-growth global economy, as many of the top exporting countries struggle with tepid demand.

It's Not Just Oil

Oil imports totaled $234 billion in 2008, and $215 billion in 2009 -- roughly 10% of all the goods and services the U.S. imported.

Goods are the largest category of U.S. imports, totaling $2.139 trillion in 2008 but just $1.575 trillion in 2009 -- a whopping $564 billion decline. And while many focus on foreign trade with China, America's biggest trading partner is Canada.

The Chinese government fought the global slowdown by ramping up a massive domestic stimulus package that counteracted not just the drop in China's exports but also weak domestic consumer demand. Whether the Chinese economy can continue expanding without the government stimulus and export growth remains to be seen.

At 7/28/2010 7:39 PM, Blogger PeakTrader said...

And U.S. exports increased at a faster rate than U.S. imports:

In 2005 dollars:


2006 1.42 trillion
2007 1.55 trillion
2008 1.63 trillion
2009 1.47 trillion
2010 1.60 trillion (annual rate first quarter)


2006 2.15 trillion
2007 2.19 trillion
2008 2.12 trillion
2009 1.83 trillion
2010 1.97 trillion (annual rate first quarter)

National Economic Trends
Federal Reserve Bank of St Louis

At 7/28/2010 7:49 PM, Blogger PeakTrader said...

Also, I may add, U.S. nominal GDP was $14.59 trillion (annual rate first quarter 2010).

Real GDP in 2005 dollars:

2006 12.98 trillion
2007 13.25 trillion
2008 13.31 trillion
2009 12.99 trillion
2010 13.24 trillion (annual rate first quarter)

At 7/28/2010 8:40 PM, Blogger PeakTrader said...

China: where’s the inflation?
Jun 15th, 2010

Financial repression

Why has inflation been muted – as it has by the way in other countries that followed the so-called Asian growth model, including most importantly Japan in the past several decades?

University of Chicago economist Robert Aliber - if the nominal exchange rate is not allowed to rise, policymakers can still contain inflation by what economists call financial repression.

This has the effect of transferring large amounts of income away from net savers, which for the most part consists of Chinese households, and in favor of net users of capital. Net users, of course, consist primarily of large, capital intensive businesses, real estate developers, infrastructure investors and local and central governments, including the People’s Bank of China, the largest net borrower of renminbi in China. Net savers are forced into subsidizing net users, in other words.

The consequence is that monetary growth is channeled not into household demand but rather into the production of more goods, and the inflationary impact of monetary expansion is muted. Financial repression is an alternative to currency appreciation or inflation.

But according to Aliber’s model, financial repression has a cost. It leads to overinvestment, asset bubbles, and rising excess capacity - correctly valued costs of Chinese investment in infrastructure, real estate development, manufacturing capacity, and government spending, exceed the economic benefits.

At 7/29/2010 1:34 AM, Blogger PeakTrader said...

China: The Cocaine of Cheap Money
Jul 28, 2010

What can the authorities do? If Beijing raises interest rates quickly, debt and bankruptcy will surge and growth will collapse.

If they don’t raise interest rates, they can keep growth high for a while longer, but the amount of reserves and misallocated capital will continue rising, making the eventual cost of raising interest rates even higher.

Finally, if they raise interest rates slowly, they will slow growth while still suffering many more years of worsening imbalances, until rates are finally high enough to begin reversing the imbalances.

So there’s the dilemma: they’re damned if they do and damned if they don’t.

At 7/29/2010 8:47 AM, Blogger Junkyard_hawg1985 said...

When I look through the statistical data on the U.S. economy, exports seem to be the lone bright spot. This bright spot shows up in rail loadings, shipping rates, international travel, export data, and manufacturing data. I have seen CD posts on all of these items.

Beyond exports, the rest of the economy is really sucking wind: Total employment levels are dropping, home sales are in the toilet, auto sales are falling, new home construction permits are dead, retail sales are falling, mall and office vacancy rates are rising, etc.

Some may say government is booming, but I don't consider this an economic benefit.


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