Production Slows Down Around the World
The slowdown in exports has hit factories around the world as Germany, Russia and the Czech Republic, factories were operating at levels last seen in 2009. Slowing growth has made it more difficult for central banks to reach their inflation targets and inspired a wave of new stimulus measures and interest rate reductions around the world.
In September the eurozone had its annual rate of inflation fall to 0.9%, its lowest level in almost three years and halfway to the European Central Bank’s goal.
“Job creation may be hampered as firms employ fewer workers to produce goods and services for export,” said Roberto Azevêdo, the WTO’s director general.
The WTO expects flows of goods across borders to grow by just 1.2% this year, down from 3% in 2018. They also noted it should rebound to 2.7% in 2020, but said that would depend on “a return to more normal trade relations.” It also warned that fresh tariffs “could produce a destructive cycle of recrimination.”
Barclay's reports that U.S. imports from China were 12% lower in the first seven months of this year than in the same period of 2018, while Chinese imports from the U.S. were down 28%. U.S. imports were up just 3.6% in the first seven months of the year, a drop from the 9.1% increase recorded in 2018. In China, imports were down 2.3%, as opposed to growing 17.2% in 2018.
The slow down in trade which causes slowdown in manufacturing is not limited to the 2 biggest economies of China and US. Purchasing managers in Asia and Europe reported a continued decline in factory output. Data from IHS Markit pointed to declines in activity in South Korea, Japan, Indonesia and Malaysia. A report by the Bank of Japan showed the country’s large manufacturers deteriorated to the weakest level in more than six years. In the U.K., factory activity fell for the fifth straight month, the longest stretch since the financial crisis.
Across the eurozone, activity was at its weakest since October 2012.
“There’s likely worse to come,“ said Chris Williamson, chief business economist at IHS Markit. ”Businesses remain downbeat about the year ahead, with optimism around a seven-year low amid trade war worries, signs of slowing global economic growth and geopolitical concerns, including heightened anxiety over a disruptive Brexit.”