A bumper gain in Japanese exports in October suggests that world trade growth is continuing to firm, consistent with the expectation here of faster global industrial output expansion into end-2014.
The Netherlands CPB research institute compiles monthly data on global trade volume. The six-month change peaked at 3.4% (not annualised) in November 2013, falling to -0.6% in May 2014 before recovering to 1.3% in August, the latest available month – see first chart. (The May low is consistent with the forecast here in early 2014 that global economic momentum would reach a trough in the late spring. Six-month industrial output growth, however, bottomed later than expected, in August – see previous post.)
Japanese real exports track* the CPB global trade measure with a “beta” of roughly two. They rose by 3.8% last month after a 1.8% gain in September. Six-month growth climbed to 4.9%, the fastest since August 2013 – first chart.
The suggested global trade pick-up is supported by evidence from other countries enjoying less of a currency tailwind. Chinese and Korean exports, and Taiwanese export orders, have surprised positively in October. Six-month growth of German real export orders rose to 4.7% in September.
Stronger exports should contribute to the six-month change in Japanese industrial output moving back to positive territory by end-2014 from -4.1% in September, implying a significant boost to global production expansion – second chart.
*The relationship was temporarily disrupted in 2011 by the Tohoku earthquake / tsunami.
