World trade improves, but no recovery in sight

According to the, world trade, which collapsed last year, is not yet showing signs of recovery. Global stimulus efforts have only succeeded at steadying the value of trade. It is too early to tell where trade growth will come from:

Consumption has yet to recover:

But for a sustainable recovery in trade, global demand has to recover on its own steam. It is not clear where demand might come from. American consumers have lost much of their astonishing appetite for goods ranging from clothes to iPods to computers. American households are now saving 5% of their incomes, up from essentially nothing a year ago. Unemployment in America and elsewhere will continue to rise. The International Labour Organisation estimates that the global jobless tally will increase by between 21m and 50m this year.

More people out of work will mean a further fall in global demand. China's boom (GDP grew by 7.9% in the second quarter) is fuelled by government investment and by the stimulus, not a rise in private consumption. Nor are other consumers stepping in. Without a move towards more private consumption in countries such as Germany and China, the world is in for a prolonged period of slow growth and correspondingly sluggish trade.

Read the whole article here.

Source: The, After the Fall, July 27, 2009

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