Monday, January 19, 2015

Trade has been a drag on growth

One of the key reasons for slower world growth has been the slowdown in trade. The growth trade has changed significantly with the post-crisi period well off the pre-crisis trend. This is closely related to the slowdown in commodity markets. Metals and food have all slowed, but goods and services have also declined. The chart is from CPB Netherlands - World Trade Monitor and  the World Bank.

If the world wants stronger global growth, it always has to go back to the issue of trade. Cutting currencies through monetary policy but not promoting trade will not lift the growth tide around the world. If the trade trend increases, the trend in global stock markets will also turn up.

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