SUPPLY CHAIN MANAGEMENT
COMPANY NEWS
2014, 19 NOV
Slowing emerging markets, weak Europe spark new global trade worries
Canada’s hopes for a sharp increase in exports face uncertainty amid new signs of a slowdown in economic growth in key global markets. Credit rating agency Moody’s Investors Service Inc. warned that China’s growth in gross domestic product could decline to less than 7 per cent next year, compared with 7.3 per cent this year. That is bound to have ripple effects through the global economy, which has recently showed signs of cooling. 

Meanwhile, A.P. Moller-Maersk AS of Denmark, the world’s largest container shipping firm, on Tuesday said it’s seeing slowing activity in China and other emerging markets, along with persistent weakness in Europe. Maersk reduced its prediction for global freight demand growth to a range of 3 to 5 per cent instead of 4 to 5 per cent for this year. Though Moody’s doesn’t see a global recession on the horizon, it did warn that if China weakens more than expected, it will spell trouble. “A protracted period of lower growth in China would affect the rest of the world by dampening trade. These effects would unfold over several years,” Moody’s said. “With the Chinese economy accounting for more than 15 per cent of the G20 – and more than 40 per cent of global consumption of key industrial metals – lower growth in China would quickly be felt in other countries. What originated as an acute correction in China’s property sector would turn into a marked and protracted global slowdown.” While India could be a bright spot, Moody’s cautioned that it doesn’t envisage any significant growth spurt globally, calling for the G20 as a whole to have GDP growth of “around 3 per cent” next year and in 2016, compared with 2.8 per cent this year. 

Canada is forecast to have GDP growth of between 2 per cent and 3 per cent in each of the next two years. Besides jitters over the Chinese economy, the outlook for global trade is murky because of the impact of instability in Ukraine and trade sanctions against Russia, though Europe will be hit harder than Canada and the United States, according to the rating agency. “The growth outlook for emerging markets is mixed, with an ongoing slowdown in China, subdued growth expected to continue in Brazil and a shallow recession in Russia,” the rating agency said. Maersk has still managed to thrive financially, despite overcapacity in the shipping industry. “The operational result of the businesses is up on average about 10 per cent in a situation where rates have been under pressure and the oil price has been down compared to last year,” Nils Andersen, group chief executive officer at Maersk, said in a video posted on the company’s website.