Dutch Exports Rise as Imports Fall in May

Dutch goods trade moved to a greater surplus in May as exports rose by 0.6% and imports fell by 3.0%. Nonetheless the sequential profiles for exports and imports both continue to point to the implosion of trade flows. Goods exports are falling by 3.4% over 12 months, falling at an 18% pace over 6 months, and falling at a 21.5% pace over 3 months. For goods imports, there's a decline of 7.2% over 12 months, a decline at a 15.8% pace over 6 months and then a decline at a 19.3% pace over 3 months. Exports and imports are sequentially falling as well as worsening their rate of decline.

The Netherlands is at the crossroads of Europe; it does a great deal of trading as many goods flow as transshipments through the Netherlands. The Dutch statistics are about trade originating from the Netherlands and exclude the transshipments that come through the economy from other European states. The Dutch economy, however, is very plugged into the world economy as far as international trade is concerned.

The negative trends that we see from exports and imports here are disturbing because they've turned sharply negative so quickly. Export and import gains were very strong toward the end of 2022; then all of a sudden the bottom began to fall out and since that point there has been a very steady deceleration in the growth of exports and imports. The Baltic dry goods index chronicles the slow down in world trade. The recovery of world trade flows from the COVID recession peaked late in 2021 and then fell off sharply in early 2022, had a small rebound, and has since continued to wither into lower territory. According to this index, world trade flows continue to wind-down.

Of course, there's a negative overhang from the Russia-Ukraine war. There are other geopolitical events that cast a pall over what would otherwise be normal economic activity. After the supply disruptions during COVID, a number of firms, particularly in the U.S., have chosen to outsource their business away from China because China was susceptible to a lot of disruptions during COVID. The multinational corporations have been looking to find a more reasonable cost of labor abroad but not necessarily the cheapest costs, trying to secure more stable and dependable supply chains for their businesses.

In the meantime, inflation has run hot and central banks continue to raise interest rates to try to control inflation. The inflation data out of the U.S. today is somewhat encouraging, but inflation remains - even in this report - too high. On a year-over-year basis, inflation is high and sticky in the U.S., in the U.K. and in the European Monetary Union. Even Japan now suspects it has an inflation problem of a much lesser dimension, but Japan is no longer taking its elevated prices for granted or as a good thing.

The global economy, in short, remains under stress and there are continuing signs that activity is slowing down. There's been a lot of talk about the potential for recessions and for global recessions, but so far that has been avoided. However, it's also true that interest rates have been slow to rise above the rate of inflation and this means that monetary policy, even as it's been raising rates, has continued to be stimulative on a worldwide basis. We should remain vigilant on the subject of recession. The risk is still looming. The weakening in trade flows and activity are a warning sign.