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The Port of Hamburg The Port of Hamburg. Photo © Kai Morgener

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Are the Winds of Trade Blowing Cold?

As the world’s four largest economies have each reported a downturn in business, Editor of The Exporter, Tim Hiscock, encourages UK businesses to make sure they're informed about global trends

Published on 31 July 2019

The world’s four largest economies have each reported a downturn in business, prompting fears of a possible global recession.

While still enjoying robust growth, The United States was hit by news last week that the economy grew by a more modest 2.1% in Q2, while revised figures for 2018 revised the growth figure down to 2.9%. Investment fell sharply as well, from 4.4% in Q1 to just 0.6%, although consumer spending rose sharply.

Meanwhile China’s growth in Q2 was 6.2%, an enviable figure by most standards, but the slowest the country has seen since 1992. The USA and China are embroiled in a tariff war, which some observers are suggesting might be a major factor in these changing fortunes.

Japan, the world’s third largest economy has suffered from falling exports this year, and the government slashed its economic growth forecast for the full year to just 0.9%, down from a previous forecast of 1.3%. Even this figure is thought to be high by some private sector bodies. Japanese exports are predicted to grow by just 0.5% I 2019, which would be the slowest growth in seven years.

Perhaps the worst hit of the big four however was Germany, Europe’s industrial powerhouse, which is braced for news that the national economy shrank in quarter two, as factory orders fell by 2.2%, adding to fears that economic growth in Q2 may be in negative territory.

These four giant economies together make up almost half of global economic activity, and the slow but steady feed of weaker growth is beginning to contribute to a sense of pessimism among investors and forecasters. London based Absolute Strategy has put the chance of a global recession at forty five percent, the highest figure they have published since the survey began in 2014.

In the United States, a poll of chief financial officers found that 48% were predicting a recession in the United States within the next six years.

But stock markets have remained bullish, maintaining gains made earlier in the year. Nevertheless, the Bank of England is warning that the risk of a recession in the UK is at its highest since 2007, as its governor Mark Carney pointed to what he called a “Sea Change” in the world’s financial markets.

British exporters face an uncertain future that is likely to be exacerbated by the prospects of the UK leaving the European Union soon, either with or without a deal. “This is beginning to look like a perfect storm that will test the biggest and best exporting companies, commented The Exporter’s editor Tim Hiscock. “The best prepared will be the ones who are best informed. We couldn’t have chosen a more important time to launch The Exporter.”

“Businesses that trade internationally are inevitably affected by trends such as these. Exporters need to regularly evaluate market conditions and review their priorities accordingly. The Exporter aims to alert readers to changes in the business environment. But the impact of global trends will be different in every case. Understanding your markets, and being aware of opportunities in emerging markets, is key to exporting success.”

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