Global Recession Produced Collapsing Trade Flows

July 15, 2009

Collapsing is not my word.  It’s how a report released today by the Organization for Economic Cooperation and Development chose to characterize commercial trade flows during the final quarter of 2008 and first quarter of this year.  Nominal exports of goods and services from this 30-nation bloc of advanced economies dropped 13.4% in the first quarter and by 27.1% from a year earlier.  The on-year plunge in 1Q09 represented a 48 percentage point adverse swing from a 20.9% increase over the year to 1Q08. In the two consecutive quarters between end-September and end-March, OECD exports plummeted 50.2% at an annualized rate.

G-7 export volumes slumped 22.8% in the year to 1Q09 and by 39.4% at an annualized pace between 3Q08 and 1Q09.  Japan was clobbered the hardest, with a two-quarter drop of 65.0% at an annualized rate and a four-quarter decline of 42.1%.  Euroland and the United States experienced similar two-quarter annualized declines of 33.7% and 35.4%.  Britain and Canada suffered harshly too but comparatively less with two-quarter decreases of 27.6% and 29.8% annualized.

Collapsing is an apt description of trade flows and not an overstatement.  Fact is that trade flows imploded more sharply in this recession than such did up to this point in the Great Depression.  What set the earlier experience far apart is that trade kept on shrinking rapidly over a four-year period as depicted in an infamous spider-web shaped graph from the period.  See chart 8.  With much more forceful monetary and fiscal stimulus support this time, plus pro-active injections of quantitative liquidity to stricken markets, the hope and expectation is that positive growth in trade is already re-igniting in Asia and poised to spread to other regions.

Copyright Larry Greenberg 2009.  All rights reserved.  No secondary distribution without express permission.



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