The Opinion Page
News and comments about the issues facing today's SCM and Inventory Management professionals.
Last week, the World Trade Organisation(WTO) released its report titled “World Trade 2011, Prospects for 2012.”
The report shows that world trade expanded in 2011 by 5.0%. This was a sharp deceleration from the 2010 rebound of 13.8%. WTO economists project that growth will slow further still to 3.7% in 2012. The slowdown is attributed the global economy losing momentum due to a number of shocks, including the European sovereign debt crisis.
This is a robust report, full of data yet easily understood due to liberal use of
graphical illustration. Presentation data over time series is truly dramatic, as
the impact of events surrounding 2008 are revealed with stark clarity. For
anyone deeply involved in international trade, I recommend the read highly.
I am an economist by education, and fully understand the value of macroeconomic analysis and forecasting. As a businessman and supply chain practitioner, however, I have to take the data and projections with a grain of salt. It is always good practice to be aware of the state of the landscape that surrounds you. It helps a person to make informed decisions. However, a litany of micro-trends can be hidden among the high-level numbers. People and businesses too frequently become spooked by bad macroeconomic news and become overly risk-averse or engage in rationalizations for the problems that they face. The truth is that big progress and big money can be made even in difficult economic times, and it is optimism that pulls us out of the troughs.
Further, it is axiomatic that it is easy to post spectacular percentage gains against disastrous performance results in prior years. Sometimes, the only direction is up.
The devil, as they say, is in the details.
That said, the report reveals the fastest growing economies in 2011 were, as might be expected in the Middle East (+ 4.9%), the CIS (+4.6%), China (+9.2%), and South-Central America (+4.5%) and China (+ 9.2%) and the Four Asian NIEs (+ 4.2%).
The slowest growing economies in 2011 included Japan (minus 0.5%), United States (minus 1.7%), European Union (minus 1.5%).
Fourth Quarter 2011 developments (Annual rates) have shown the Euro area declining (minus 1.3%), Japan declining (minus 0.7%), the United States declining (minus 3.0%) and China’s growth softening at +8.2%, (down from +9.5% in third quarter).
Quoting the report,
“More than three years have passed since the trade collapse of 2008-09, but the world economy and trade remain fragile. The further slowing of trade expected in 2012 shows that the downside risks remain high. We are not yet out of the woods,” WTO
Director General Pascal Lamy said.
“The WTO has so far deterred economic nationalism, but the sluggish pace of recovery raises concerns that a steady trickle of restrictive trade measures could gradually undermine the benefits of trade openness. It is time to do no harm. WTO members should turn their attention to revitalizing the trading system and to ensuring such a scenario does not materialize.”
WTO economists cautioned that preliminary trade figures for 2011 and forecasts for 2012 were difficult to gauge due to the extraordinary levels of volatility in financial markets and in the broader economy for the last few years.
The preliminary figure of 5.0% for world merchandise trade growth in 2011 is down 0.8 points from their most recent forecast update in September 2011. These figures are in “real” terms, ie, adjusted to account for inflation and exchange rate fluctuations."
So, world economies can be described in a single word: fragile. And for various reasons, it may stay that way for quite some time. Interconnectedness and globalization have their benefits, but they also leave the entire world sensitive to disturbances in any given part.
John Skelton is the Principal Consultant and founder of Strategic Inventory Management.