Shipping containers sit on board a cargo ship at the Eurogate Terminal at the Port of Hamburg in Hamburg, Germany. (Photographer: Krisztian Bocsi/Bloomberg)

Three Alternative Gauges Advise Not to Fret on Global Trade, Yet

(Bloomberg) -- Three different alternative leading indicators are telling us not to fret about global trade prospects even as U.S.-China trade tensions remain on low boil.

Logistics giant Deutsche Post DHL Group, Oxford Economics Ltd., and Nomura Holdings Inc. are each seeing reasons for calm in their own gauges of export growth, which rely heavily on data from Asia and have proven to be reliable predictors of global trade health.

“I wouldn’t get too stressed out just yet,” said Rob Subbaraman, head of emerging markets economics at Nomura in Singapore. While his team’s measure, which is meant to give a three-months-ahead read on export growth in Asia ex-Japan, has fallen for two months through February, it’s still at relatively high levels.

“It’s flashing amber signs” that are consistent with some of the reported weaker March exports data out of China, South Korea and Taiwan, Subbaraman said. “If it falls for three months in a row, I think we’ll need to start to get worried.”

That worry could come alongside a broader global slowdown. In other parts of the world, figures have turned a bit sour recently, including in Euro-area industrial production and U.S. consumption, said Subbaraman.

While Nomura’s economists won’t reveal the ingredients of the secret sauce, their gauge relies on eight primary components and was revamped about five years ago to adjust for the greater relevance of data such as electronics and other vital signs of emerging markets.

At Oxford Economics, a basket of 11 Chinese economic indicators is telling analysts that last year’s global trade upturn should be sustained for a while longer.

“For now, we see a gentle rise in protectionism, but we don’t see this having notable adverse effects on global trade and growth,” said Ben May, Oxford’s London-based director of global macro research. “The strong start to the year in China and likely acceleration of GDP growth in the U.S. on the back of the fiscal stimulus point to another good year for the global economy in 2018.”

Oxford’s “China growth factor” measure has, since 2010, demonstrated a strong correlation with the year-on-year pace of global trade with a three-month lead. It relies on a composite of figures in the world’s No. 2 economy, including construction and trade as well as rail freight and steel output.

The measure is hovering around flat year-on-year growth as of February. Two caveats hold for the February data -- a big jump in exports might not be sustained, and two of the 11 China growth indicators aren’t yet reported and incorporated.

And while the Oxford index hasn’t yet been rocked by trade-related developments, May said he’s watching broad-based falls in business sentiment surveys that could coincide with “more cautious behavior by firms.”

The cargo-watchers at DHL started publishing a global trade barometer in January, drawing on “large amounts of logistics data that are evaluated with the help of artificial intelligence,” according to a March 28 release. It’s meant to give a three-month lead, and for now “continues to forecast a solid positive growth.”

Readings above 50 in the DHL measure indicate positive growth in global trade; the composite measure held at 66 in March. Among individual barometers for Asia’s four biggest economies, all remain above 60. India’s measure wallops the competition at 84, mostly thanks to air imports of high-technology goods.

The four-times-a-year release, which involves an evaluation of 240 million variables, focuses on import and export data from seven countries that together account for 75 percent of global trade: China, Germany, India, Japan, South Korea, the U.S., and U.K.

©2018 Bloomberg L.P.

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