New data from the OECD shows that EU growth is contracting, as Brexit and US-China trade tensions take their toll.
According to the new report released by OECD, exports from the EU contracted 1.8% in the 3rd quarter compared to the previous quarter whilst imports dropped by 0.4%. Even though all EU major economies were affected, Italy has been one of the worst hit with a drop in trade for the last consecutive 6 quarters.
Imports from G20 countries, which account for 85% of world output, have also dropped 0.9%.Laurence Boone, OECD chief economist, warned that high levels of uncertainty on trade policy and geopolitics had resulted in stagnating global trade, which is dragging down economic activity in almost all major economies.
The decrease in exports across the world is being held responsible for lower oil prices as well as the depreciation in other major currencies against the dollar.
EU countries are heavily reliant on trade, explaining the significant dip in figures in the EU. For example, in Germany, trade is equivalent to 87% of gross domestic product, compared with 27% for the US.
Timme Spakman, an economist at ING, said:
“European merchandise trade has been impacted significantly by uncertainty surrounding the trade war and Brexit,”
He added: “the slowdown of German industry had an impact on European trade, as German producers ran down inventories rather than importing new intermediates”.
Surveys being published are also showing that more than 70% of EU & US businesses have mentioned uncertainty is a big factor for them not to invest.
Brexit uncertainty has also impacted UK exports negatively as well as causing the value of the sterling to fall against the dollar.
Looking more further afield, when we asked Ana Boata, lead Eurozone and UK economist at Euler Hermes if there are any positive signals beyond the established trading nations, she told us:
"The major drivers are the US-China trade dispute and the monetary reaction, but we also hear alarm bells ringing in the emerging markets, particularly Argentina, Turkey and South Africa. China slowing down quicker than expected definitely has an impact – especially on South East Asia markets – but there’s also oil prices.'
“Policy easing in the US, China and the eurozone is not yet feeding through so all remain a drag on trade growth.” said Adam Slater, lead economist at Oxford Economics.
"While there are some signs of stabilisation in forward-looking sentiment indicators, the picture for the near future remains gloomy." Mr Slater added: Any improvement in the trade picture looks fragile and limited.”
You can read the full OECD report here: http://www.oecd.org/sdd/its/International-trade-statistics-Q3-2019.pdf