Inflation returns to the global economy?

Over recent weeks, many analysts around the world have become more optimistic over the outlook for world trade and this view has apparently been helped by some – although by no means all – of the most recent Asian trade data and by a partial rebound in PMI (Purchasing Managers’ Index) data in Europe and the USA. 

Admittedly, we are usually quite sceptical of the ‘information value’ of the PMIs (in the 1990s we did find them useful but over recent years they seem to have become ‘endogenous’ or reflexive with regard to equity markets) but we do nevertheless have some considerable sympathy with the hypothesis that global trade values may be increasing once again following what would appear to have been an 18-month long slump. 

However, we are also aware that the available data is not yet unambiguous on this topic.  For example, if we observe the important and comprehensive CPB world trade volume data, we find that the trend in the data over the middle part of this year remained disappointing and that the IATA airline freight data, which is significantly more timely, has only become a little better over recent weeks.

Over the last decade or so, we have also found that Korea’s usually timely and reliable export data can often provide a useful ‘coal-miner’s canary’ for underlying world trade trends. If we observe Korea’s latest data, we find that although the country’s export growth in September was perhaps rather disappointing, in part as a result of a more demanding comparison point, there can be no doubting that the trend within the data has become decidedly less negative over the last few months (i.e. the three-month moving average for the data has been circa -4% as opposed to – 10% during the first quarter of this year).