Strong dollar dampening global trade growth, OECD says

Global trade growth eased back in the second quarter as the dollar strengthened markedly against other major currencies, according to the Organisation for Economic Co-operation and Development (OECD). Exports and imports among G20 nations increased by 2.1 per cent and 2.6 per cent, respectively, as compared to 4.8 per cent and 6.2 per cent in the previous quarter.

“While high commodity prices, exacerbated by the war in Ukraine, continued to fuel merchandise trade growth in nominal terms, the slowing growth in value terms partly reflects the increasing value of the US dollar against other major currencies,” the OECD said.

The Paris-based organisation said rising energy prices boosted merchandise trade in north America, with exports increasing by 10.2 per cent in the US and by 11 per cent in Canada. In the European Union, merchandise exports recorded modest growth (up 0.3 per cent), while imports grew faster (up 3 per cent), largely driven by energy.

Europe has been hit hard by the current surge in energy prices and is expected to slide into a modest recession in the fourth quarter.

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Ireland’s half-year trade figures, published last week, show the value of Irish exports rose to a record €105 billion, nearly €25 billion (31 per cent) up on the previous year, boosted in the main by increased pharma exports.

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The value of goods imports on a half-year basis was up by €17.5 billion (36 per cent) to €66.7 billion driven in the main by higher energy prices.

The OECD said merchandise exports contracted in east Asia, as confinement measures continued to disrupt economic activity in the region and inflationary pressures weighed on overseas demand for goods. Exports fell by 4.9 per cent in Japan, 0.4 per cent in China and 2.2 per cent in Korea.

The OECD’s figures show G20 services trade growth also slowed in the second quarter despite the rebound in travel. Preliminary figures suggest exports and imports are estimated to grow by 1.1 per cent and 2.2 per cent, as compared to the slightly higher rates recorded in the first quarter of 2022

“Strong travel and transport supported growth across many G20 economies, while prolonged Covid-19 containment measures weighed on services trade in East Asia. Services trade in North America expanded markedly in Q2 2022, largely driven by a strong rebound in travel,” the OECD said.

Conversely, services trade slowed in Europe. Exports contracted by 2.7 per cent in Germany, reflecting a decline in intellectual, financial and business services, while imports rose by 4.6 per cent boosted by travel. France recorded a modest increase in exports (up 1.8 per cent) due to transport and travel, whereas imports contracted by 1.2 per cent.