Gloomy news as Canada takes barometric global trade reading from Singapore

SINGAPORE`s experience stands out as an accurate barometric reading for global trade, but recent readings show the news is not good, says Peter Hall, chief economist of Canada exim bank, Export Development Canada (EDC).

"An important nexus in a hot trading zone, Singapore - where international trade is an astonishing 300 per cent of GDP - often yields early clues about the near-term direction of global trade," Mr Hall said in his weekly emailed column.


"The picture is pretty gloomy. The trend in non-oil export growth has been down since last October, and momentum going into the third quarter is weak. Trade is being weighed down by flows to the EU and US, but intra-regional exports - notably to Hong Kong and Malaysia - have also softened," he said.


"In spite of robust gains in domestic demand, thanks in great part to solid employment growth and a vibrant consumer, Singapore`s overall GDP has faltered. The strong momentum that built in the first quarter came to a sudden halt in the April-June period. Year-on-year growth fell from a steady double-digit clip to just 0.8 per cent in the second quarter, tracing a similar movement in industrial production. So far, data seems to be corroborating the slowing global trend," he said.


But Mr Hall concedes not everyone agrees with his assessment. "Thailand`s woes are similar to Singapore`s, but export growth in Indonesia, Malaysia and Vietnam has been robust. Why the contrast? There`s a common thread in both the weak and strong cases: Japan. In the post-earthquake period, supply-chain disruption is still hampering trade in electronic and other high value-added goods," he said.


"However, demand for raw materials has soared, given Japan`s need for non-nuclear energy sources and materials for reconstruction. These flows suggest that poor trade numbers are temporary, related more to supply-side disruptions than a more serious weakening of demand. Rebounding Japanese production and nascent increases in Taiwanese exports of electronic products hint at a resumption of growth," he said.


"In the coming months, timing will be critical. Japan appears to be on the mend, but political uncertainty is hampering the process. Barring any further political or economic disruptions, it is very likely that momentum will rise toward year-end. But the balance between growth and decline could hardly be more delicate.


"The bottom line? If momentum in global trade is to rise, the clues will likely surface first in Singapore. Let`s hope that in this volatile year, more positive macroeconomic signals are not far off," said Mr Hall.