News Content

Increasing signs of flagging trade puts global growth at greater risk

THERE are growing signs that global growth may be headed for a slowdown and one indicator, the Baltic Dry Index (BDI), is down 65 per cent so far this year, notes Reuters news agency.

The fall in the Baltic Dry is partly driven by new shipping capacity coming online, but there other indicators show trade momentum is slowing and could be taking global growth with it.

Global trade volume fell in May, the most recent month measured, according to data from the Netherlands Bureau of Economic Policy Analysis, and global trade momentum has been in negative territory for much of 2014.

The IMF last week cut its global growth to 3.4 per cent, from 3.7 per cent in April. The US economy shrank in the first quarter and the IMF has downgraded US growth expectations to 1.7 per cent for the full year.

This, despite US manufacturing and consumer confidence showing strength, boosted by robust asset markets. Housing has been weak with mortgages harder to obtain.

There are other signs that growth is less healthy year on year, notably the OECD leading indicator is now only a bit more than half it was last November.

Public debt markets are so hot, said Reuters, that regulators are tamping down investor enthusiasm for risky loans and bonds. But markets depending on bank financing are having a hard time.

Scarce bank financing hit the Euro zone harder than the US with its big public capital markets. Private sector Euro zone loans 1.7 per cent in June from the same month a year earlier, according to the European Central Bank.