Amid a mounting Global Trade Crisis, trade has experienced the sharpest decline in five months this June, as per the worldwide Purchasing Managers’ Index (PMI) surveys compiled by S&P Global Market Intelligence. This marks a 16th successive monthly drop in export orders for goods and services at the end of the second quarter of 2023.
The PMI New Export Orders Index has taken a plunge to 48.3, from 48.8 in May, signaling a worsening global trade scenario. This is primarily due to a significant decrease in goods trade compounded by a slight decrease in the growth rate of services exports.
Particularly in the developed economies, the US saw exports dip for the 13th consecutive month. The gloom continued in the manufacturing sector, with only seven out of the 28 economies covered by S&P Global PMI surveys reporting any growth in goods export during June.
Services Trade Softens the Blow
There is, however, a silver lining in this gloomy scenario. Despite a 16th successive monthly contraction in manufacturing new export orders, the service sector exports managed to rise for the fourth consecutive month. But the pace of services export growth slowed down from May’s record surge, marking it the second strongest since 2014.
The downturn in goods trade is of concern as the reduction in machinery exports often denotes a decline in investment spending. Similarly, the decrease in consumer goods exports points to reduced household demand. However, this downturn may partly be due to a post-pandemic shift of consumer spending from goods to services, as travel restrictions have been eased significantly in 2023 compared to the previous three years.
Export Losses and Emerging Economies
Among the developed economies, Eurozone suffered the most with its export decline hitting a seven-month-high. US and Japan also reported sharp declines in trade. The emerging markets, on the other hand, reported a marginal uplift in trade with India leading the way.
India reported a tenth successive month of export gain in June, a performance mainly driven by rising sales of both goods and services. Russia, too, made a comeback in export growth, propelled by a resurgence in services trade. But the overall picture remains somber, with economies like Brazil and mainland China showing worrying signs of a slowdown.
S&P Global’s PMI data paints a challenging picture of the global trade landscape, with a considerable downturn in goods trade and a weakening growth in services exports. With key exporting economies like South Korea and Taiwan also experiencing sharp falls, the world faces an increasing global manufacturing export downturn.
The road to recovery looks challenging. But the role of services trade, the resilience of emerging economies like India and Russia, and the easing of travel restrictions may offer a glimmer of hope as the world continues to navigate these troubled trade waters.
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