Global retail supply chains were left to count the cost of a post-pandemic inventory glut at the start of 2023, according to the latest Index of Global Trade Health from Tradeshift. Trade activity across the sector dropped 12 points below the expected range in Q1, a two-year low. Demand for transport and logistics capacity also remained low, at 9 points below the baseline, amid signs of a broader economic slowdown.

Global slowdown hits supplier cash flow: Total transaction volumes across all sectors fell to 5 points below the expected range, marking the fifth consecutive quarter that global trade activity has remained in contraction territory. New invoices from suppliers fell sharply in Q1 off the back of a steep decline in order volumes over the previous two quarters.

Brighter outlook for the US: US trade activity mirrored the global pattern. Transaction volumes tracked 6 points below the expected range, primarily due to a steep decline in supplier invoices. A solid recovery in ordering activity during the quarter hinted at a brighter outlook in the months ahead. Order volumes in the US finished Q1 at a year high.

China’s factories spring into action: Transaction volumes in China climbed back into the expected range in Q1 for the first time in 21 months following December’s lifting of strict Covid prevention measures. However, supply chain operators will be nervous about the broader global slowdown. Furthermore, China’s dominance of global manufacturing supply chains also faces erosion from accelerating diversification efforts among Western companies. Tradeshift’s latest Index shows trade activity in Vietnam rising five times faster than the global average over the past year. Activity levels in Mexico rose six times faster than the worldwide average during the same period.

Eurozone and UK get a reality check: After a strong Q4, trade activity across the Eurozone fell again in Q1, dropping to 8 points below the expected range. Supply chains across the UK also had a more challenging start to 2023. Transaction volumes dipped to 7 points below the expected level. UK trade activity could also face a tough six months ahead, with order volume growth crashing to 10 points below the baseline in Q1.  

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