The United Nations Trade and Development Agency (UNCTAD)’s recent Q1-2024 Global Trade Output report points to global trade originating from developing countries outpacing that of developed countries.

In this commentary, we highlight what we believe are the key insights and takeaways from the latest UNCTAD Global Trade Update.

Supply chain and direct materials strategic encouraged to make their own review of the report findings and stated implications.

Background

In our ongoing Supply Chain Matters Global Supply Chain Assessment series, we highlight monthly and quarterly production and supply chain activity reporting as manifested in PMI and other closely watched supply chain activity focused reports.

In our summary and perspectives of March and Q1-2024 PMI indices, and in our recently published summary and perspectives of June and Q2-2024 PMI indices, we have pointed out that the data reinforces ongoing shifts underway in production, export and import activity levels. Both Q1 and Q2 PMI reporting provide evidence of increased momentum. However, this momentum has been centered in certain regions and by added industry and product demand specific needs.

The latest UNCTAD’s Global Trade Update report, which summarizes trade data through Q1 of this year, provides more detailed indicators for what is currently fueling global trade activity.

Government Industrial Policy Effects on Global Trade

The report specifically indicates that “Industrial policies are targeting both traditional and high-growth sectors, leading to significant trade reallocations and increased supply concentration.”

Authors point specifically to: “Many of the interventions in developed and emerging markets have focused on support measures aimed at enhancing the competitiveness of strategic industries, positioning domestic firms as key suppliers of low-carbon products, and bolstering the resilience of supply chains for critical and strategic products.”

An Uneven Global Trade Recovery

The summarized takeaways from this latest report indicate that in Q1-2024, global trade “continued its modest and gradual increase that began in the second half of 2023.”  Report authors highlight positive economic growth “but with significant disparities.” While forecasts for global GDP growth remain at upwards of 3 percent, the noted short-term outlook is expressed as “cautiously optimistic.”

The report pointed to where trade growth momentum is evidenced: “Trade growth in developing countries, specifically South-South trade, outpaced that in developed countries.”

In export activity, China and India are cited as exhibiting very strong quarter-over-quarter export performance, followed by the Russian Federation and the United States. China’s export growth level was reported as  9 percent in Q1, while India’s export growth level was noted as 7 percent. As we have pointed out in our PMI summaries, China’s excess capacity in these growth sectors is being channeled toward export markets such as Europe, Russia, and certain Latin American countries.

We encourage our supply chain executive, strategist and planning focused readers to specifically have a look at the table titled: Global interdependence trends are shaped by geopolitical and economic factors. As an example, in the column of “Increasing trade dependence,” the Russian Federation is noted as having a 5.8 percent annual change in trade dependence on China. Correspondingly, in the Decreasing trade dependence column, the Russian Federation is noted as having a corresponding 4 percent decreased dependence on the European Union, because of existing sanctions.

Brazil is noted as having a 3.3 percent annual change in trade dependence on China, contrasted with a 1.1 percent decline in trade dependence with the United States.

Industry Specific Growth

For industries that are fueling trade growth, specific mention is made of products supporting energy transition and artificial intelligence related product demands as aspects of this momentum. Products cited are electric vehicles, solar panels, batteries and high-end semiconductor devices.

The above stated, report authors paint a caution in the light of shifting government trade policies and geopolitical tensions curbing these trends, favoring more domestic sourcing over time.

Added Thoughts

The bottom line is that the data reinforces that strategic and tactical shifts in product demand and corresponding supply network response are indeed being influenced by ongoing dynamic trends that are changing with each passing quarter.

Supply chain leaders, strategists and direct materials strategic sourcing professionals  encouraged to make their own review of the report findings and stated implications.

Be prepared!

Bob Ferrari

© Copyright 2024, The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.