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Today's Feature


Global indicators point to trade growth buoyed US recovery while EU gathers strength


Key to immediate global trade growth is the state of the US economy, writes Peter Hall, vice president of Canada's trade credit, agency Export Development Canada. For the moment, he says, performance is consistently robust.

But this take-off is particularly nerve-wracking, given the significant delays. It's essential to focus on what's coming, and we are training our sights on the US Composite Leading Indicator. In particular, we are keeping a close eye on the progress of the housing market and the orders being placed by consumers and businesses for bigger-ticket items.

America is the linchpin of the recovery, but it can't do it on its own. Europe's economy is just as big, and it's going to have to do its part if the world hopes to see a true growth revival this year. Germany is the engine of the Zone, and it's largely going to be up to business. We've keeping our eyes on the Ifo Business Expectations barometer, and also the ZEW indicator of macroeconomic expectations. Both gauges tumbled through much of 2014, but rallied late in the year, surprising to the upside. It's the first sign in awhile that German businesses are seeing through the recent mayhem to better times.

A key prescient indicator at any moment in the economy's voyage is the attitude of industrial buyers. These are the "nerves-of-steel" front-liners who have to purchase materials in advance of production, and their opinions, tabulated in the Purchasing Managers Index for a widening array of countries, really count. They are bullish on the US, and are exercising varying degrees of cautious optimism just about everywhere else. Look to these indexes to confirm or deny true recovery this year.

Our eyes are also on industrial capacity indicators. These are normally backward-looking, but this time around, the multi-year capital spending doldrums have tightened capacity in many key locations. Money isn't the issue; corporations are cash-rich, so when they decide it's time to spend, it's likely to be big.

Central banks are also on the indicator list. In order to keep a lid on price movements, they have to see nascent pressures well in advance. Signals of pending interest rate moves are likely one of the big changes we can expect in 2015 will give an instant signal of where things are going. No doubt there are some surprises in store on this front.

Oil prices are bound to make things interesting. We can expect volatility here, so it bears monitoring, but on balance lower prices are expected to stimulate demand worldwide.

Fundamental to recovery will be the extent to which growth spreads. Indicators of global trade will be front and center this year. They are often posted with a delay, but the CPB global trade data give a good sense of current global trade flows. The HARPEX index, flat at present, gives a good sense of global container shipping flows. Domestic non-oil exports from Singapore are also a worthy bellwether of trade activity in Asia.

Politics will remain a factor to watch in 2015, and as such, we will be continuously monitoring the multiple political indicators. With investment playing an important role in the fledgling global recovery, it is essential to be on top of any development, either in ongoing circumstances or in budding ones, that could derail crisis-jaded investors.

The bottom line? Global recovery is steadily gaining lift. But a heavily-laden craft needs lots of runway space and clear air ahead to gain the lift needed to sustain it for the long flight ahead. So far, the indicators are saying that we are in decent shape, and set for a truly Happy New Year - but we need to keep our eyes on them.


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