Global Economic Prospects 2014

Five years after the financial crisis, the world economy is showing signs of bouncing back. Read more ...

Development Prospects

Providing information, analysis, and advice on global trends in the world economy.  Find out more ...

Global Economic Monitor

Now free. Daily and monthly updates on global economic developments and relevant topical issues. Find out more ...

Syndicate content

Add new comment

Prospects Weekly: Global trade rebounded solidly in Q4 2012, Industrial commodity prices have declined in recent weeks, Capital flows remained strong in February

Global Macroeconomics Team's picture
Consistent with a gradually strengthening global economy, global trade rebounded solidly in Q4 2012 from its slump in Q3 2012. Recently released new export orders sentiment data suggest that the expansion in global trade will likely continue, however the pace of expansion could decelerate by Q2. Industrial commodity prices have declined in recent weeks, reflecting market reactions to recently released US Federal Open Market Committee minutes and weaker-than-expected Chinese business sentiment indicators. Despite a slight decline, capital flows to developing countries remained strong in February as the increase in syndicated bank lending offset the weakness in bond issuance. Overall, gross capital flows for the first two months of 2013 remain substantially higher than in the same period in 2012.
Consistent with a gradually strengthening global economy, global trade has rebounded. Global trade expanded by 11.5% in Q4 2012 up from a contraction of 1.8% in Q3 2012. Consistent with long-term trends, trade is growing at a faster pace among developing countries (imports grew at 16.7% in Q4 2012) than in high-income countries (9.3%). Nonetheless, even though the growth rate was lower, the percentage point (ppt) increase in import growth between Q3 and Q4 for high-income countries (15.0 ppt, i.e -5.7% to 9.3%) was higher than that of developing countries (8.9 ppt). The cyclical uptick in global trade is expected to continue as new export order indicators in January increased for several economies, including the Euro Area. However new export orders for February paint a mixed picture: expanding in China, Germany, and Japan, but contracting in Brazil, the Euro Area (ex. Germany), and the USA, suggesting a possible deceleration in the pace of global trade growth by Q2.
Industrial commodity prices have weakened in recent weeks. Despite strengthening of the global economy, prices of most industrial commodities have reversed course since mid-February: aluminum is down by 9.2%, copper by 7.2%, nickel by 11.4% natural rubber by 10.4% and crude oil (WB average) by 6.9%. The declines likely reflect the recent US Federal Open Market Committee's minutes suggesting that the QE program could end sooner-than-expected. Further, signals by Chinese authorities to cool their property market, and weaker-than-expected Chinese manufacturing PMI data for February added to the bearish sentiments (China accounts for more than 40% of global metal consumption). For 2013, the World Bank forecasts metal prices to rise by 1.3% (y/y), and crude oil to decline by 2.9% (y/y), notwithstanding intra¬year fluctuations.
Despite a slight decline, capital flows remained strong in February as the increase in syndicated bank lending offset the weakness in bond issuance. Gross capital flows (international bond issuance, cross-border syndicated bank loans, and equity placements) decreased slightly to $51.7 billion in February from $56.5 billion in January. After the record $37 billion issuance in January, bond flows fell sharply to $15.7 billion in February amid increased risk-aversion along with seasonal effects. While equity issuance remained stable at $9.7 billion in February, syndicated bank lending reached $26.3 billion boosted by a $14.1 billion mega loan to the Russian oil company Rosneft (after $16.8 billion in December 2012). Gross capital flows to developing countries for the first two months of the year amounted to $108 billion, up 49% in the like period of 2012.

Download the Prospects Weekly as PDF here.