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More Signs of Growth in Global Trade

Posted by: Joe Weber on July 10

earth.jpg Global trade may bounce back over the coming five months, TD Bank Financial Group economist Richard Kelly says. The Canadian economist, in the July 10 edition of TD Economics, a bank report, says improving business and consumer activity in the U.S. will be a key driver.

“While we will likely not fully recoup the ground lost over the next year, there is growing evidence to suggest we will see a much needed rebound in the growth of global trade flows before the end of this year,” Kelly says. He adds that “a rebound in U.S. imports is likely over the second half of 2009, even with lingering frictions likely to remain in credit markets for some time. And if the U.S. is importing, someone, somewhere is exporting.”

The economist argues that the reduction of business inventories in the U.S. appears to have reached a bottom. Indeed, he says the pessimism that led to inventory cuts over the last six to nine months “looks to have simply been overdone in hindsight.”

Domestic business activity – based on manufacturing surveys – “is screaming for an imminent rebound in U.S. real non-petroleum imports to the rang of a 6-10% annualized growth.” The bank’s economic models suggest 3-10% annualized growth is possible for the remainder of this year.

Regrettably, the growth of trade won’t translate immediately into gains on the jobs front. The bank expects net losses in jobs every month until the middle of 2010, suggesting only a gradual recovery.

As for the beneficiaries of such trade, the biggest exporters are likely to be China, Canada and Japan. A big caution: “maintaining that momentum through 2010 would still be a challenge due to the soft labour markets.”

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