Is global trade contracting?


The World Trade Organisation has slashed its forecast for trade growth for this year and next. Does this mean the global economy is in trouble? Should we be worried about our own financial outlooks – and how can Continuum help?

2019 has been a difficult year for the global economy.

The latest sign of trouble arrived last week, when the World Trade Organisation revised its estimates of global trade figures for the year. World trade in merchandise is now expected to expand by only 1.2% during 2019, making it the weakest year since 2009 and the financial crisis. Just six months ago, the organisation was forecasting a 2.6% expansion.

What has gone wrong?

The biggest factor seems to be President Trump’s trade war with China. Both the United States and China the world’s two largest economies have seen a cooling in commercial activity in recent months. This is at least partly due to the tariffs they have imposed on each other’s exports, raising costs for businesses and consumers, and discouraging investment.

There has been a knock-on effect across Asia hitting export dependent economies like South Korea. In October, South Korea exports fell 14.7% compared with the same month the previous year, with everything from steel to consumer electronics suffering. Japan and Taiwan sell large volumes of manufactured goods to China. They have also seen reduced sales as China slows.

Prices for crude oil fell, another sign that markets were assuming weaker global economic growth ahead. Less commercial activity means reduced fuel and energy needs.

Just to make things worse, the prospect of a no deal Brexit refuses to go away, and is just one of the factors that is making Europe look uncomfortably close to technical recession. German manufacturing has shrunk because Chinese companies facing tariffs on exports to the United States are reducing purchases of German-made machinery – while German car companies are reluctant to invest given Mr. Trump’s threats to impose tariffs on German vehicles sold in the United States. Reduced German consumer spending contributes to weakness in other European economies like Spain and Italy.

So, is there trouble ahead?

At Continuum, we keep a close eye on global trends, but we believe that things may not be as grim as they appear. President Trump’s insistence on the US Federal Reserve reducing interest rates may act to stimulate the economy of the US, and hence the rest of the world

The global economy is slowing down – but although some nations are suffering economic shrinkage, the trend seen by the WTO is still one of growth, albeit subdued. If the trade wars can be ended in an armistice, the global economy could recover quickly.

Most economists say a global recession remains unlikely, but it makes sense to get expert help from Continuum to prepare for a future that is full of uncertainties

How can Continuum help you?

The global economy has its ups and downs and being prepared for whatever the future holds is important. At Continuum, there is a lot we can do to help you with those preparations. You can read the latest financial news with our weekly education mailer, and keep an eye on your portfolio with our Personal finance portal.

But our real strength comes from the skills of our team. Our Independent Financial Advisers can give you expert advice on your investments, and on developing a strategy that could help you preserve and grow your wealth, whatever happens on the global stage.

Sitting down with an investment expert could help you look at the impact of any global slowdown on particular markets or business sectors or be the ideal opportunity to review your entire investment approach.

Not only could this be vital to ensure your portfolio is properly diversified and suitable for volatile times, their help could also help you see where opportunities may lie.

Getting help with your money, and avoiding a personal economic slowdown is easier with Continuum experts working with you. Why not call us today?

The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.

The value of investments can fall as well as rise and you may get back less than you invested.

 

References:

https://www.ft.com/content/e9254f74-fb00-11e9-a354-36acbbb0d9b6

https://www.nytimes.com/reuters/2019/11/01/world/asia/01reuters-global-economy.html

 

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