Wednesday, December 21, 2011
You may recall that last month I developed a methodology for seasonally adjusting the monthly world trade figures from the WTO. Based on initial reports from only 20 of 70 countries for October, it seemed that world trade was dropping sharply in that month (seasonally adjusted). At this point, all but a handful of countries have reported for October and that has confirmed the initial picture as essentially valid.
However, being an impatient soul, I wanted to know what was happening in November. So I repeated the exercise with the eleven(!) out of seventy countries that are all that are available at present (representing about a quarter of global trade). Clearly this is slightly sketchier but again I rely on the fact that imports and exports are telling the same story - trade did not continue to fall in November, but instead made a partial recovery.
Overall then the current best picture is that world trade has basically gone flat in the second half of 2011 - we are currently below the May level so it's clearly not growing - but we cannot say with confidence that it is contracting at present. The world economy is hanging in suspense, waiting to see how bad things will get in Europe.
On a related note, one of the things that seemed obviously important to me in seasonally adjusting the data above was to excise the great recession before developing the seasonal factors so that they didn't end up dominated by the particular timing of that contraction. To my surprise, it seems that is something that is not routinely taken care of in seasonally adjusting a lot of official US economic data and thus a lot of it in this quarter may be a little overoptimistic because of the resulting distortions. FT Alphaville has more details and I highly recommend studying that piece and using it to upgrade your worldview filters.