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28 February 2023 – After resilient performance in the first half of 2022, global trade deteriorated in the second half of the year and is likely to remain muted in 2023. Despite disruptive events in H1 2022 (start of the war in Ukraine, long lockdowns in China etc.), global trade of goods grew by +4.1% y/y during that period). Allianz said however, weakening global demand amid sustained inflation, the long replacement cycles of durable goods and depleted excess savings have reversed the trend. From a supply and manufacturing perspective, while the situation differs from one sector to another, corporates generally show no signs of increasing stocks in the short-term. In fact, an inventory glut is visible, and particularly destructive for retailers. With most of these factors set to persist in 2023, trade growth is likely to remain muted this year.
Allianz added that they are revising slightly on the upside our forecast for global trade growth in volume in 2023, from +0.7% to +0.9%. Our updated global trade model points to a quarterly profile of slight q/q contractions in global trade of goods and services in Q4 2022, Q1 and Q2 2023, before a moderate recovery in Q3 and somewhat of a firming up in Q4 (see Figure 12). Global trade of goods and services in 2024 is also slightly revised on the upside, expected to grow by +3.9% in volume terms (instead of +3.6% previously expected). We still expect price effects to be negative in 2023 (resulting in a yearly contraction of global trade in value terms) in the current context of a normalisation in supply chains and the price of trade.
For inventory management and supply chains, lessons have been learnt from the Covid-19 and post-Covid shortages. Oversupply is likely to prevail in 2023. Destocking amidst the early stages of the Covid-19 crisis in 2020 and ensuing capacity mismatches and supply-chain disruptions into 2021-2022 have pushed more companies to adopt the just-in-case model of inventory management (instead of just-in-time). As a result, after more than a year of supply-chain disruptions illustrated by shortages of critical goods, extended transportation delays and costs of inputs shooting up, our in-house indicators tracking the global supply-demand balance suggest a situation of oversupply since Q4 2022 (see Figure 13). Our indicator measuring production shortfall reached the lowest level since 2011 in the US, and the lowest since early-2020 in the Eurozone. Ample supply and some stabilization in supply chains are likely to prevail this year on the back of weakening demand, replenished inventories, increased capex and normalizing shipping conditions (higher capacity, easing port congestion and sinking spot freight rates). Source: Tralac