Rebalancing and redrawing: how the global supply chain is shifting Everything Everywhere All At Once
Global trade activity dipped to 5 points below the expected range in Q1, which appears consistent with a broader slowdown across major economies.
Suppliers are feeling the impact of falling order volumes as buyers attempt to realign inventory volumes with changes in consumer spending.
Tradeshift’s Index of Global Trade Health for Q1 of 2023 shows trade activity contracting for the fifth straight quarter, with global transaction volumes across our network tracking at 5 points below the expected range.
“The good news, both in the US and at a global level, is that orders are starting to rise again, suggesting a period of readjustment that, while painful, is at least temporary,” Tradeshift’s CEO, Christian Lanng posits. Lanng continues, “These are positive signs, suggesting a level of confidence across large buyers that has been lacking over the past year.”
Global trade activity dropped to 5 points below the baseline due to a slowing economy and an inventory glut.
Retailers, in particular, are feeling the effects of post-pandemic inventory rebalancing. Activity across the sector fell to 12 points below the expected range.
Trade activity in Mexico and Vietnam has grown at multiples of the global average in the past year as businesses accelerate diversification efforts.
Trade in the US remained low, at 6 points below the baseline, but rising order volumes suggest a brighter outlook.
After a strong Q4, activity in the Eurozone fell to 8 points below the expected range. UK trade activity dropped to -7 points.
Order volumes remained in contraction territory in Q1, but only just.
We should see a corresponding uptick in invoice volumes, but this won’t happen quickly. HSBC found that suppliers are waiting an average of 56 days between submitting their invoices and receiving payment, and buyers have no intention of changing those terms in the foreseeable future.
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.
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