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Doubts on Global growth – world trade slows down

World economy is undoubtedly growing, however faces several challenges. Moreover latest data from CPB World Trade Monitor shows that 2015 is being worst year so far since the financial crisis, in terms of global trade.

  • World Trade Index, after reaching at 140 mark in December 2014, dropped to 136.5 in March. This is the sharpest drop since 2008 financial crisis as index reached levels not seen since June 2014.

Can it be shrugged off calling it seasonal, like US economy in the first quarter?

As a matter of fact it can't be. In spite of weakness in the first quarter data in US, the weakness actually came not from US but from Emerging Asia. That means slowdown in China.

Weakness in Chinese economy is not favorable for global growth, even growing US cannot be substitute for China's appetite for Raw material. Moreover it looks that vicious cycle of debt fueled economy is coming to rapid unwinding.

All data pointing to rapid slowdown in China. IMF predicted growth of just 6.8% this year, lower than official target of 7%.

With Federal Reserve set to raise rates this year Chinese economy will be seeing large scale capital flight. For the first three month already $150 billion has flown out of capital account, as per official data.

With slowdown in global trade, growth momentum will be less in 2015, which might prompt net easing from central banks around the world and pace of hike by Federal Reserve would be very slow.  

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