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Economic Insights

Global trade volume is growing faster than industrial production, while shipping volumes are strengthening.

The world’s manufacturers have been ramping up production in recent months—and the pace at which they’re shipping goods out to other nations also is quickening. That’s a significant and positive development for the global economy.

Consistent cross-country data show that the pattern of sluggish world-trade volume relative to world industrial-production growth, evident after the financial crisis of 2008–09, may finally have shifted in a positive direction.

Prior to the financial crisis, trade volume rose more sharply than industrial production, a sign of increasingly integrated global production and the stronger cyclicality of tradable manufactures. After the crisis, world trade grew in line with, or even slightly below, global production. However, trade has now accelerated at a faster pace than production, reverting to something closer to the pre-crisis norm.

Emerging markets, especially those in Asia, are leading the acceleration in world trade volume. Interestingly enough, the strongest surge in emerging-market trade volume has been on the import side.

The sharp improvement in recent weeks in the Baltic Dry Index, a widely followed global shipping indicator, is a sign that the trade improvement is holding up into the fourth quarter. Moreover, despite a significant idle fleet, ship leasing rates also are rising again.

It is likely that the growth in trade is yet another reflection of rising equipment spending by businesses, since capital goods are a significant portion of global trade. A stronger recovery in capital spending would be a signal that another important structural drag on economic growth has weakened, and that global growth is accelerating sustainably. This has many positive implications for markets, among them the potential for faster growth in productivity—and the mitigation of increasing inflationary pressure.

 

The value of investments in fixed-income securities will change as interest rates fluctuate and in response to market movements. Generally, when interest rates rise, the prices of debt securities fall, and when interest rates fall, prices generally rise.

Forecasts and projections are based on current market conditions and are subject to change without notice. Projections should not be considered a guarantee.

This article may contain assumptions that are “forward-looking statements,” which are based on certain assumptions of future events. Actual events are difficult to predict and may differ from those assumed. There can be no assurance that forward-looking statements will materialize or that actual returns or results will not be materially different from those described here.

The information provided herein is not directed at any investor or category of investors and is provided solely as general information about our products and services and to otherwise provide general investment education.  No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as Lord, Abbett & Co LLC (and its affiliates, “Lord Abbett”) is not undertaking to provide impartial investment advice, act as an impartial adviser, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement investor, contact your financial advisor or other non-Lord Abbett fiduciary about whether any given investment idea, strategy, product, or service described herein may be appropriate for your circumstances.

The opinions in the preceding commentary are as of the date of publication and are subject to change. Additionally, the opinions may not represent the opinions of the firm as a whole. The document is not intended for use as forecast, research or investment advice concerning any particular investment or the markets in general, and it is not intended to be legal advice or tax advice. This document is prepared based on information Lord Abbett deems reliable; however, Lord Abbett does not warrant the accuracy and completeness of the information.

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