Robert HARNEIS -TDO- (FRANCE)- According to Global Trade Monitor, another increase in world trade in November means that it has exceeded its pre-pandemic level. However exports remained depressed in the US and emerging Europe. Since November, container freight rates have surged, reflecting shipping supply struggling to cope with demand. While these disruptions may soon begin to weigh on trade flows, there is limited evidence of any impact so far.

Data released yesterday from the CPB Netherlands Bureau show world trade volumes increased by 2.1% m/m in November and have returned to growth in year-on-year terms.  The increase means that the real value of world trade has now risen by 22% since its trough in May and is now about 1% higher than its pre-virus peak in December 2019.

The regional breakdown for November revealed that the largest increases in real exports were in Asia.  The performance of Asia’s export sector is a continuation of what we have witnessed since the onset of the pandemic. They have been the principal beneficiaries of consumer demand shifting away from spending on domestic services and tourism towards goods for working from home and home improvement. Indeed, real exports in Asian economies were considerably above pre-virus levels in November but they were still 5-10% below in the US and emerging Europe.

Reports of delivery problems in business surveys have coincided with steep increases in the cost of container shipping since November. Freight rates have risen the most for routes starting in China or east Asia, which makes sense given that it is their exports for which demand is greatest.

The levels of congestion at ports so far in January have been way higher than they were during the first two weeks of 2020, particularly in the US. Consequently, turnaround times – the difference between the date of departure and date of arrival of a vessel – have increased. In addition to disrupting the just-in-time delivery of goods, port congestion threatens to dent demand for exports if shipping costs remain elevated. And airlines will hardly be able to pick up the slack, given that passenger planes – which carry most of the world’s air freight – are still running slim services due to limited demand for travel.

So far, this does not appear to have been a hit to export demand. Not only have export orders risen in advanced economies, but Korean exports for the first 20 days of January reveal that actual exports have held up well. However, it is still early days. The problems afflicting the world’s shipping industry may come to bite in the coming months.

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