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  September 5th, 2018 | Written by

Setback in world trade

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  • After a good July, world trade numbers in August were disappointing.
  • The sharpest trade slowdowns are expected for emerging markets, which are most exposed to rising trade tensions.
  • Exports in September are expected to fall strongly in South Korea, Japan, India, Taiwan, and Brazil.
  • Chinese exports growth is expected to slow in September.

The gKNi World Trade Indicator powered by LogIndex—the data company of Kuehne + Nagel Group—stood at 139.7 at the end of August, a 1.3-percent drop compared to the previous month. The index is up 7.5 percent year over year. The drop in August is the largest monthly contraction reported in 2018.

The prospect of escalating trade wars has been weighing on investors, as recent data from Bank of America has shown that pressures on the institutions of global trade are viewed as the biggest risk for the world economy.

While most advanced economies are experiencing steady growth, Japan and emerging markets have lost considerable momentum. This trend will continue in September according to LogIndex forecasts. Foreign trade will reach negative territory year over year in South Korea, Taiwan, and Japan. Exports are expected to fall strongly in South Korea (-11.8 percent), Japan (-10.2 percent), India (-9.8 percent), Taiwan (-8.0 percent), and Brazil (-4.8 percent). Chinese exports growth year over year is expected to slow down from +12.2 percent in July to +7.0 percent in August. LogIndex sees this trend continuing through September.

This trend is in line with the latest manufacturing output forecasts: In September, the global industrial production will reach the lowest monthly increase since July 2015, according to LogIndex AG. The gKNi World Industrial Production (WIP) provides a real-time assessment of the activity in the manufacturing and mining sector around the globe. The seasonally and inflation-adjusted indicator is expressed in month over month percentage changes.