For a year that held the promise of a return to normality, 2022 threw plenty of curve balls. Heading into 2023, Tradeshift’s Index of Global Trade Health foreshadows the beginnings of a new cycle for world trade.
Whisper it, but the overall picture is looking a little less catastrophic than it did just a few months ago. Global supply chain activity continued to fall against expectations in Q4, ending the year 3 points below the baseline. But the rate at which activity is declining has tapered significantly compared to the beginning of the year when order volumes across Europe appeared to go into freefall.
Take a look at the infographic highlighting the global trade data from the Q4 Index.
A significant slump in order volumes across US supply chains took the shine off a slight improvement in global trade activity in Q4-2022, according to our latest world trade data from the Tradeshift platform.
Our Index of Global Trade Health shows the total volume of transactions across global supply chains at 3 points below the baseline in Q4, a modest improvement on the 5-point deficit recorded in Q3 of 2022. Both the Eurozone and the UK followed the global trend, with activity 3 points below the baseline in Q4.
The slightly brighter picture worldwide contrasted with a significant drop in activity across supply chains in the US. Trade transactions in the US fell to 6 points below the expected range in Q4, the steepest quarterly loss of momentum in over a year. Order volumes, in particular, fell sharply, finishing the quarter 9 points below the baseline, the most significant reversal in buying activity since the world locked down in Q1 2020.
In an interview with CNBC, Christian Lanng, CEO of Tradeshift, said: “What we’ve seen over the last 18 months is people are realizing this is the new normal. It’s not like, ‘we just need to get over COVID’ or ‘we just need to get over inflation, and we’ll be fine.’ We still see trade tension, we still see deglobalization… People are realizing more and more that you need nimble, you need flexible, you need agile supply chains.”
Slackening demand across the worldwide transport and logistics (T&L) sector suggests a more protracted slowdown in 2023. Transaction volumes across the sector finished the year 11 points below the baseline, having fallen steadily since the beginning of the year.
The end of zero-covid restrictions in China could well lift demand in 2023. In the short term, however, the Tradeshift Index world trade data suggests a difficult transition. Transaction volumes in China dropped to 4 points below the baseline as a huge surge in Covid cases threatens to overwhelm the country.
“China’s reopening is certainly significant, but it remains to be seen whether Chinese factories can continue to dominate global supply chains as they did prior to the pandemic,” said Lanng. “Supply chain operators that were forced to find alternatives to China during the pandemic may think twice before returning, particularly as geopolitical tension rises.”
Tradeshift’s Index of Global Trade Health for Q4 of 2022 suggests the start of a new chapter for global trade. While global supply chain activity did fall against expectations for Q4, these are the strongest numbers seen all year, suggesting modestly improving trading conditions overall. Take a look at our world trade data infographic, zooming in on some of the overarching trends seen in Q4.
For more reasons than one, this quarter’s Index feels like the economic equivalent of ‘long Covid.’ The initial sickness seems to have passed, but the lingering after-effects can often be just as painful as the acute phase. All the indications are that 2023 provides a strong possibility of relapse.
Take a closer look at our full infographic outlining the findings from this quarter’s index, and download your copy of the Index of Global Trade Health here.