World trade growth loses steam

There is rising concern about the loss of momentum in world trade growth and the fact that export-driven economies may run out of steam as a consequence. According to a monthly index report released Wednesday, global goods trade has slowed to a quarterly growth rate of just 0.9 per cent in the third quarter, which is the smallest expansion rate since the steep drop in trade in the second quarter of 2009.

According to the report, compiled by a research group, the Netherlands Bureau for Economic Policy Analysis, imports have dipped in both advanced and developing nations in September, with Latin America and Central and Eastern Europe being the only regions whose exports grew in September.

''Momentum has been decreasing steadily since January, when [trade growth] reached 6.2 per cent,'' the report said. ''The third-quarter figure is below the long-run average for the first time since July 2009.''

It may be pointed out that trade volumes saw a sheer drop at the end of 2008 and early 2009, sparking fears that protectionism would raise its ugly head globally.

Economists point out that the loss in momentum of world trade may be the result of a rapid drop in demand, rather than resulting from longer-term structural issues. They also point out costlier trade finance may well be impacting volumes.

World trade had shown a sharp recovery in late 2009 and early 2010, without returning to pre-recession levels, however, and Wednesday's report raises fresh concern that it may once again be slipping below its long-term growth rate.