World trade fell at the fastest pace since the financial crisis in February as coronavirus hit Asia, in an early indication of the further deterioration in goods volumes that economists expect as the virus spreads around the world.
The volume of global trade in goods dropped 2.6 per cent in February compared with the same month last year, according to a widely watched world trade monitor published by the Netherlands Bureau for Economic Policy Analysis.
Compared with the previous month, global trade fell 1.5 per cent, the second consecutive contraction this year. Global trade volumes had already been slowing as a result of last year’s trade war between the US and China.
“As Covid-19 causes factory outages and reduces spending across the globe, a wave of declining trade volumes follows the [spread of the] virus,” said Timme Spakman, an economist at ING. “Despite a fierce decline in trade volumes globally, the full extent of the Covid-19 crisis is still not reflected in these numbers.”
China recorded a 7.3 per cent fall in imports in January as it became the first country in the world to shut down parts of its economy in a bid to stem the spread of the virus; its imports dropped a further 3.2 per cent in February, the data published on Friday showed.
Imports to Japan contracted nearly 9 per cent in February compared with the previous month, the largest contraction of any major economy.
Industrial production in Asia’s emerging economies narrowed by 9 per cent in February compared with the same period last year, according to data also produced by CPB.
Western countries were less affected as the virus had not then hit their economies. The US reported no change in trade volumes compared with the previous month, while the eurozone’s trade volumes dropped 1.5 per cent, driven by falling exports.
The trade data “shows that world trade was already contracting even before the main impact of the coronavirus was felt”, said Adam Slater, lead economist at Oxford Economics. “The impact of the virus on global demand and on supply chains means that in the coming months, world trade volumes are likely to show double-digit annual declines.”
About 20 to 30 per cent of scheduled container ship departures have been cancelled until May, according to market intelligence firm Ocean Insight. In a survey of 300 shipping and freight professionals across the world conducted by the firm this month, 71 per cent said they had experienced declining volumes.
A monthly global activity survey of purchasing managers carried out by IHS Markit and JPMorgan in March found that exports had fallen to the lowest level since the survey began in 2014.
This month the World Trade Organization warned that global merchandise trade would shrink by up to a third this year, a larger drop than during the financial crisis, as millions of people around the world stay at home to limit the virus’s spread.
Gabriella Dickens, economist at Capital Economics, said: “Overall, we expect the coronavirus to knock around a fifth off world trade volumes this year.”