The current squeeze on working capital is the biggest threat to global trade’s recovery
Although global trade activity saw a modest improvement in Q2, growth remains low, 4 points below the expected range, indicating uncertainty in the global economy.
Not Fast & Furious enough: global trade recovery slower than expected
With the current economic climate, global trade is facing tremendous challenges, from working capital pressures and rising inflation to unpredictable consumer spending.
Tradeshift’s recent analysis shows tentative signs of recovery, with the U.S. showing promising transaction volume growth. Conversely, China’s trade activity isn’t bouncing back as quickly due to decreased global demand. While there is an overarching sense of improvement, the scales could easily tip toward risk.
Tradeshift’s CEO, Christian Lanng confirms, “Global trade has faced significant challenges in adapting to the realities of an economy scarred by a vicious circle of rampant inflation, rising instability, and unpredictable consumer spending patterns.”
Global transaction volumes improved slightly in Q2, but activity levels are still 4 points below the baseline and appear to be settling at a lower growth rate.
Trade activity in the US is leaving the rest of the world in its wake. Transaction volumes were 3 points above the expected range in Q2.
Demand fell sharply across the technology sector in Q2.There’s certainly some evidence that organizations are starting to take a more considered and cautious approach to technology spend.
Trade activity across the Eurozone rose 3 points below the expected range, but the outlook remains volatile.
Waning demand for manufactured goods has taken the shine off China’s grand reopening. Transaction volumes rose to 1 point above expectation in Q2, but progress is more steady than spectacular.
Now is not the time to watch and wait
According to analysts at Gartner businesses should adopt an offensive approach to their digital and IT strategy. Investing in the right digital initiatives can mitigate the negative effects of uncertainty. Gartner specifically highlights automation as a prime area for investment.
The advantages are apparent. For instance, e-invoicing solutions offer cost-saving potential, operational efficiency, and improved cash flow management, making them highly appealing during economic downturns.
About the Tradeshift Index of Global Trade Health
Many of the world’s largest buyers and their suppliers use Tradeshift’s trade technology network to exchange digitized purchasing and invoicing information. The data these transactions yield provides us with a unique awareness of trading activity between businesses.
Tradeshift’s Index of Global Trade Health analyzes anonymized world trade data flowing across our platform to reveal a timely perspective of how external events are impacting business-to-business commerce around the world.
We acknowledge that there are limits to how accurately our view of what is happening on our network can reflect how complex global supply chains are reacting to a variety of external factors.
What our world trade data does provide is a useful snapshot that provides clues as to what might be happening to the global economy. The patterns we see in our data become more valuable as we combine them with other third-party data and expert insight, something which you will see us draw on throughout this report.
The Index of Global Trade Health compares business-to-business transaction volumes (orders processed from buyers and invoices processed from suppliers) submitted via the Tradeshift platform against a ‘baseline’ created by analyzing medium-term seasonal trends in the transaction data that flows across our platform.
A reading that meets the baseline indicates growth aligned with expectations against historical trends. Readings greater than and below the baseline indicate above-trend and below-trend growth.
Looking at the data this way helps give a sense of how volatile activity is across different sectors and geographies. For example, a sudden rise in orders might trigger orders to jump at a rate exceeding what we consider normal. By contrast, waning demand might trigger volatility in the opposite direction.
We consistently strive to improve and evolve the accuracy of our analysis. As a result, from time to time, you may see small revisions to historical numbers reported in previous versions of the Index.
Suppliers are feeling the impact of falling order volumes as buyers attempt to realign inventory volumes with changes in consumer spending.
Rising costs and a slowdown in demand kicks off a new game and new rules for global trade. Global supply chain activity continued to fall against expectations in Q4, ending the year 3 points below the baseline.
Can US supply chains remain immune to trouble from abroad?
Inflation is more than a passing phase
A new chapter in the age of uncertainty.
Global trade passes the latest resilience test… for now at least.
Recovery stalls on supply chain issues. Temporary pain or a bellwether of more disruptions to come?
New normal? Supply chains adapted, but companies have yet to decide whether the economics of resiliency stack up.
Trade chasm: Has the Pandemic brought buyers and sellers closer together or pushed them further apart?
Global trade trend activity rises sharply as recovery builds momentum.
After seeing trade activity slump to record lows as a result of the lockdown in early second quarter, signs of a recovery began to emerge in May and June as economies in the West began to reopen.
Ever since reports of the virus first emerged in January, we’ve followed the impact of the pandemic on business-to-business trade and the health of global supply chains. It’s been an extraordinary few months.