Panjiva State of Trade report points to lower optimism in 2016

If the current global trade environment was a deck of cards, it is fair to say optimism would not be the “Ace” in the hole.

That was a key theme of the 2016 “State of Trade Survey” published by Panjiva, an online search engine with detailed information on global suppliers and manufacturers, in partnership with Sourcing Journal. This annual survey provides a detailed analysis on global trade patterns and trends focused on various segments of global trade.

Data and feedback was based on responses from 464 global trade professionals, with a focus on importing, exporting, strategy, and logistics primarily in the retail and apparel sectors.

As was the case in the previous two years, the optimism of respondents towards global trade continued to dip, with 45 percent of the survey’s respondents optimism about prospects for global trade this year, which is down from 2015’s 55 percent and 2014’s 64 percent.

What’s more, those with a negative outlook appear to be on the rise, with an in increase of 10 percent in 2014 to 18 percent in 2015 and 26 percent in 2016. The top three reasons for the negative outlook cited in the report included: rising wages in manufacturing hot spots at 63 percent; a slump in U.S. demand at 42 percent; and commodity price volatility at 40 percent. Rounding out the top five were slumps in demand in Asia and Europe, respectively. Others garnering attention were terrorism, war, natural disasters, global health risks, and port problems.

Even though the feeling of pessimism is prevalent in this data, Panjiva said that 70 percent of its respondents still maintain that they expect to ship more goods in 2016 annually.

“Some of the key factors that led to the declining optimism we are seeing [in the report] include the state of U.S. economy, with U.S. import growth down and job numbers not growing as expected,” said Annelise McCarthy, head of Panjiva’s customer success team. “There also remains a real concern around China, too, and how it can affect the over all economy, given that it is struggling in terms of export levels and its domestic currency value heading down. This has led to concern by sourcing professionals on how it could impact the economy over 2016.”

McCarthy said that while global trade sentiment has been more upbeat in past years, the reasons for a more cautious outlook stem from decent recovery in growth on the U.S. side, which is near its end and represents a departure from past years.

A focus on retailer sourcing strategies in an effort to shift supply chain strategies, especially in the apparel sector, was a key theme in the report, with 72 percent of apparel sector respondents looking to source in a new market, 48 percent looking to diversify their supplier base over 2016, and 36 percent hoping to improve manufacturing efficiency, which the report pointed to as a significant opportunity for costs savings.

And the most commonly cited markets buyers are looking to source from were Asia-based because of the lower-cost opportunities, with China, Vietnam, India, and Bangladesh topping the list.

“Much of this has to do with labor costs and there are emerging options, especially in southeast Asia, for these companies to get cheaper prices, which they are getting pressured to do,” noted McCarthy. “But the change tends to be slower than people realize as companies are moving to different countries, which may have cheaper labor but may lack the needed infrastructure and factories may not be as efficient. There is an initial investment period these companies need to have to move from a place like China to these other regions.” 

Other factors in China, in regards to regaining its trade growth momentum, include the perception of declining GDP, even though it is around 6 percent, which dwarfs current U.S. GDP, said Chris Rogers, Panjiva research director.

“That still means there is money to be spent and, more importantly, invested around the world,” he said. “It speaks to the absolute growth of their economy, with China likely to be more optimistic about this growth than other people are. This bears out in its manufacturing PMI, which has been over 50 the last few months, along with Chinese exports expected to head up over time. Its economy is not heading down; it is just not growing as quickly as it has before.”

From a logistics perspective, 90 percent of survey respondents in the logistics sector expect the global trade market to grow or stay the same in 2016, coupled with importers also expecting 2016 to be a growth year, even though they have a negative economic outlook.