Global trade growth slows down! Domestic factories: orders decline significantly

"While overall demand is strong, orders fell noticeably in the latest quarter," said the head of LeverStyle, a Hong Kong-listed clothing maker for leading global brands. Manufacturers across Asia are seeing early signs of cooling demand from global customers, especially apparel and gadget makers.

“We are receiving orders months and quarters ahead of actual shipments, and people are becoming very cautious about buying inventory and ordering,” said Stanley Szeto, executive chairman of LeverStyle. “Growth will be much weaker in the coming months.”

Global trade growth slows

Strong exports from Asia, especially China, have been a major driver of the global economic recovery from the COVID-19 pandemic, but recent data show that global trade demand is slowing due to supply chain crises related to China's strict control of the epidemic and the war between Russia and Ukraine, as well as surging inflation.

Analysts point out that consumers are shifting from buying goods to buying services, while rising interest rates and inflation are also curbing discretionary spending. The fading of government stimulus measures and financial market turmoil are also having an impact, and all macroeconomic conditions are unfavorable to consumers.

But the slowdown has not yet reached the point of a trade recession, underlying demand remains solid and consumers have money to spend. Household spending in the United States, for example, continued to gain momentum at least in April. Shanghai is easing its lockdown, which is expected to relieve pressure on the country's exporters.

Still, the overall shift is stark. The World Trade Organization in April cut its forecast for merchandise trade growth this year to 3% from 4.7% previously. Asia’s manufacturing sector contracted in April for the first time since June 2020, according to closely watched PMI data.

In addition, throughput at some of the world’s busiest ports fell again in April, with nine out of 10 ports reporting below long-term averages in terms of shipping, exports and freight volumes.

Oxford University economist Priyanka Kishore pointed out that trade in goods is shifting to trade in services, and the outlook has become quite challenging at least this year and next. Goldman Sachs' model shows that Asian trade will slow further in the coming months.

Weak consumer demand

Steve Chuang's Hong Kong company produces products such as power systems for campers and other recreational vehicles, mainly sold to the European and American markets. His orders set records in 2020 and 2021, but now this situation is changing.

“The spending power in our major markets is becoming very weak and trade will still grow but not as much as in the past two years,” Chuang said.

“It’s clear that consumers are becoming more cautious about their spending,” said Christopher Tse, chief executive of Musical Electronics, a Hong Kong-based company that makes consumer electronics such as Bluetooth speakers and high-powered home audio systems for the U.S. market.

“We saw a cooling in orders starting in March,” Tse said. While sales of his healthcare-related products remained good, demand for products such as high-powered speaker systems waned.

Editor✎ Ashley/

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