DHL sees continued strength in global trade fundamentals

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The outlook for global trade continues to improve despite recent concerns over increase global protectionism. The DHL Global Trade Barometer increased to 66 in March, up from 64 when the index debuted in January. This would suggest that global trade is likely to regain some momentum in upcoming months even as the US institutes measures to restrict imports into the country.

 Trade readings strengthened in March (Source: DHL)

Trade readings strengthened in March (Source: DHL)

About the DHL Global Trade Barometer

Introduced in January of this year, the DHL Global Trade Barometer is a new indicator that tracks the current state and outlook for air and ocean trade in the world economy. Using commodity-level trade data and machine learning processes, DHL (in partnership with Accenture) developed a global weighted index of current month trade activity and forecasted activity for the upcoming two months. Readings above 50 signal growth in the index, while values below 50 suggest a contraction in trade.

The index covers trade flows for seven constituent countries (US, China, Japan, Germany, UK, South Korea, and India) through ten industry verticals. Historically, the index has a close correlation with global combined air and containerized ocean trade and provides a useful view into trade performance in the near future.  The index is published four times a year, with the next release scheduled for June of this year.

Broad-based positive results

Results from the Global Trade Barometer signaled broad-based growth during the month, as each of the seven countries covered in the index had readings well above the expansionary threshold of 50. Improvement in the outlook was led by South Korea and the US, which each saw a significant jump in their Barometer readings from their values in January. India’s outlook weakened slightly, although readings were still the highest among the countries covered by DHL.

Results by mode were far more mixed, however. The index for ocean trade jumped to 63 from the previous value of 60, while air’s outlook slipped slightly in this month’s report. Declines in South Korea and German air trade were primarily responsible for the decline in the air index, while the US and China saw increases in their air outlooks.

Behind the numbers

The readings from this month are encouraging in that they point in the direction of stronger trade volumes going forward, but that does not mean that all of the recent protectionist rhetoric and actions are largely benign in the global trade arena. For one, there is typically a lag between changes in policy and actual activity when it comes to international trade volumes. As a result, even an environment that looks solid now could turn south as these policies take hold.

The other thing to keep in mind is that the DHL Barometer is still a new indicator. the historical correlation between the Barometer and trade volumes looks to be very, but it remains to be seen how the index performs under different types of shocks to the global economy. Still, the news for now is positive, and the trends that emerge here are another piece of information to keep an eye on going forward.

Ibrahiim Bayaan is FreightWaves’ Chief Economist. He writes regularly on all aspects of the economy and provides context with original research and analytics on freight market trends. Never miss his commentary by subscribing.