OECD trade – the combined volume of exports and imports – contracted by 18% between the second quarter of 2008 and the first quarter of this year. However, two pieces of information released this week suggest that trade is now recovering.
First, German export orders rose by a further 8% in June, to stand 19% above the low reached in February. Orders are correlated with OECD trade volumes, with a historical "beta" or elasticity of about two – see first chart.
Secondly, the sum of the US ISM manufacturing imports and export orders indices broke above 100 in July, i.e. more firms now report rising volumes than falls. This indicator is also a good proxy for changes in OECD trade – second chart. The rise in the imports index probably mainly reflects slower destocking by US firms.
