“The Darkening Outlook For Trade Is Discouraging:” WTO Sharply Lowers Global Outlook Amid Trade Conflicts 

A synchronized global downturn and an escalating trade war with China has prompted the World Trade Organization (WTO) to reduce its global growth forecasts for 2019 and 2020. 

World merchandise trade volumes are expected to only expand by 1.2% in 2019, substantially slower than the 2.6% growth forecast in April. The 2020 global growth forecast is expected to be 2.7%, down from 3% previously. 

“The darkening outlook for trade is discouraging but not unexpected. Beyond their direct effects, trade conflicts heighten uncertainty, which is leading some businesses to delay the productivity-enhancing investments that are essential to raising living standards,” said WTO Director-General Roberto Azevêdo.

“Job creation may also be hampered as firms employ fewer workers to produce goods and services for export,” he added.

WTO economists said the global downturn is partly due to President Trump’s trade war, but also “reflects country-specific cyclical and structural factors, including the shifting monetary policy stance in developed economies and Brexit-related uncertainty in the European Union.” 

The economists were firm in their global outlook: “Macroeconomic risks are firmly tilted to the downside.”  

As shown in Chart 1, quarterly merchandise export and import volumes on a seasonally-adjusted basis in the world, developed and developing regions have dramatically stalled since 2018, with no signs of a turn up until next year. 

In Chart 3, world services trade has “plateaued” since summer 2018.

Global Project Management Institute (PMI) new export orders peaked at 54 in January 2018, has since dropped to 47.5 in August, one of the lowest prints since October 2012. Again, there are no signs of a rebound this year according to WTO. 

And as we noted on Monday, the global policy uncertainty index continues to soar to a fresh record high. In 2019 alone, the index has jumped from 289 in January to 348 in August. 

The balance of risk remains tilted to the downside through 2H19. WTO confirms that the economic rebound or “green shoots” Wall Street was predicting for 2H19 is fake news. A growth scare for stocks is nearing; determining the trigger for the next stock market plunge is currently what every concerned money manager is trying to figure out.