India falls on DHL Global Trade Barometer with 49 points

September 28, 2019: India fell below the 50-points-threshold with 49 points on the DHL Global Trade Barometer (GTB) released this month. The DHL GTB predicts that Indian trade will continue to lose momentum coming to the point of no growth.

The overall index decreased by -4 points since the previous update in June, now reaching 49. This is attributed solely to the deceleration in ocean trade, dropping -9 points to 50. Air trade continues to struggle despite gaining +3 points to 48.

The DHL GTB is a tool developed to forecast three months of containerised ocean freight volumes and air freight. DHL uses data from seven countries, which represent roughly 75 percent of the global volumes in air and ocean.

The DHL GTB predicts that Indian trade will continue to lose momentum coming to the point of no growth. The overall index decreased by -4 points since the previous update in June, now reaching 49. This is attributed solely to the deceleration in ocean trade, dropping -9 points to 50. Air trade continues to struggle despite gaining +3 points to 48.

The GTB revealed that prospects for global trade have deteriorated further as the overall index is down -1 point to 47, indicating slightly negative growth. Declining global air trade was the sole trigger by losing -4 points to 45, whereas the index for global ocean trade remained unchanged at 48.

One year ago, growth prospects for India were very strong with a GTB index of 83 points (September 2018). With a decline of 34 points in the last 12 months, India today is the country with the highest losses of all seven GTB countries.

Both air imports and air exports are expected to contract slightly. The sluggish chemicals & products outlook is pulling the outlook down for Indian air export, which is not fully offset by the positive outlook for temperature or climate controlled air exports goods.

On the import side, the extended contraction of high technology offsets the expected growth of industrial raw materials and machinery parts.

Ocean trade outlook is carried by the modest growth of exports. Ocean exports of chemicals & products and temperature or climate controlled goods are forecasted to be bullish. Basic raw materials and consumer fashion goods are also expected to grow robustly negating the weakening land vehicles & parts and industrial raw materials. Ocean imports are deteriorating as basic raw materials and machinery parts are declining and weighing on ocean trade outlook despite the mild growth expected of industrial raw materials and chemicals & products.

The trade conflict between China and the US was the reason for most negative trade outlooks in September. It is expected that US trade will shrink further, remaining in negative territory with 45 points, despite having climbed +1 point since June. Both, US air and ocean trade prospects are almost unchanged compared to the previous update. For Chinese trade, the GTB forecasts a moderate decline by - 4 points to 45. Main driver of this development is the weak performance of Chinese air trade which has dropped significantly by -8 points to 43 over the past three months.

Eswar S Prasad, professor of trade policy and economics at Cornell University in Ithaca, NY, USA,
commented, “China-US trade tensions have ratcheted up to higher levels and are already affecting
global supply chains as businesses adjust to the new reality that both sides are digging in for a long trade war."

Only for UK and Japan the GTB forecasts a positive growth momentum for the next three months (53 points). Quarter-to-quarter comparison illustrates that both countries reveal see-saw positions, with Japanese trade coming from a negative to a positive index and UK declining by -3 points since June.

"Rising trade tensions in other parts of the world, including between Japan and Korea, and the looming prospect of a messy Brexit are likely to have an increasingly disruptive effect on world trade volumes. The level of uncertainty about macroeconomic growth prospects has driven down
business investment around the world, with adverse effects on cross-border trade of machinery and equipment. Household consumption has remained strong in most major economies but the stagnation of trade in consumer durables, reflected in the GTB component indexes, portends weakening in this key driver of GDP growth. Overall, this GTB update confirms the slowdown in global growth and heightens concerns about growth stagnation in the coming months,” added Prasad.

Apart from India, US and China, South Korea and Germany fell below the 50-points-threshold, with 45 and 48 points, respectively.

“Worldwide, trade conflicts continue to smolder. Geopolitical tensions are causing uncertainty. Against this backdrop, global trade continues to develop surprisingly well. Although the DHL Global Trade Barometer has further decreased – with an index value of 47 points – world trade is still closer to staying at its high level. This strengthens our conviction that globalisation will go on and that logistics will remain its key enabler also in the future,” Tim Scharwath, CEO of DHL Global Forwarding, Freight, said.

The next GTB update will be released end of November 2019.

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