A cocktail of fresh challenges and familiar problems hit global trade
Just as we thought supply chains might have a moment of relief, the world had other ideas.
Geopolitical tensions, aggression in Eastern Europe, and rising inflation rates have spelled out a rocky start to 2022 for global trade activity.
We ended 2021 with signs of growth for many regions as supply chains began addressing bottlenecks and backlogs in orders. As new waves of disruption emerged at the start of the year, this growth was put on hold with many regions citing drops in transaction volumes, invoice volumes, and order volumes. One of the common troubles seen throughout? A rise in inflation and the price of commodities.
The rise in the cost of living and inflation, namely the price of gasoline for people worldwide, has caused consumers to halt their placement of new orders. Opting instead to save their money to offset the difficult market, this trend has created a troubling outlook for suppliers. Experts warn that in the next few quarters, enterprises may need to utilize their cash reserves to balance out the decrease in demand. But, the outlook isn’t fully bleak, as some regions around the world have shown only moderate impacts on their trade levels to date.
Key findings
The optimistic outlook from Q4 was halted by a drastic 9-point drop in global trade activity.
Russia’s aggression and actions in Ukraine have dramatically impacted global trade activity.
Transaction volumes in the Eurozone fell by an alarming 14 points in the previous quarter, giving signs of warning that Germany may be heading towards a recession.
Supply chain experts warn that Q2 and Q3 will be critical for supply chains. If order volumes continue to drop, they may need to dip into their cash reserves to offset the losses.
The rise in inflation and the cost of commodities, paired with new challenges to the market have kept consumers wary about placing new orders. Suppliers need to find ways to renew buyer confidence, or the results may be damaging.
Demand has been slowing over the last 6 months, but the snags in logistics are meaning that output costs remain high.
Perspectives
Where do enterprises go from here?
The focus remains on adopting and implementing advanced software and technological solutions to help create efficiencies in their supply chain processes. Outside the tech sector, some countries have seen increased benefits in employing a nearshoring approach. Canada and Mexico have seen significant rises in their invoice volumes after adopting this method, giving hope to other countries around the world.
About the Tradeshift Index of Global Trade Health
Purpose
Many of the world’s largest buyers and their suppliers use the Tradeshift platform to exchange digitized purchasing and invoicing information. The data these transactions yield provides us with a unique perspective on trading activity.
Tradeshift’s Index of Global Trade Health analyzes anonymized data flowing across our platform to reveal a view of how external events are impacting business-to-business commerce around the world.
Methodology
The Q1 Index shows business-to-business transaction volumes (orders processed from buyers and invoices processed from suppliers) across the Tradeshift network during the period of January 1, 2022, through March 31, 2022.
We looked at quarter-on-quarter measurements for total transactions on our platform to provide a sense of how different regions are performing against the patterns we see globally.
The pandemic has been a key part of the narrative for our Index. To help visualize this, we looked at cumulative growth in transactions to understand the degree to which different regions have successfully addressed the shortfall in transactions caused by lockdown restrictions.
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. Our data provides a valuable snapshot that offers 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, which you will see us draw on throughout this report.
Download the full reportPast Reports
Q4 2021
Global trade passes the latest resilience test... for now at least.
Q3 2021
Recovery stalls on supply chain issues. Temporary pain or a bellwether of more disruptions to come?
Q2 2021
New normal? Supply chains adapted, but companies have yet to decide whether the economics of resiliency stack up.
Other Links
Q1 2021
Trade chasm: Has the Pandemic brought buyers and sellers closer together or pushed them further apart?
Other Links
Q4 2020
Global trade trend activity rises sharply as recovery builds momentum.
Other Links
Q3 2020
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.
Other Links
Q2 2020
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.