World Trade and Output Have Fully Recovered

by: Mark J. Perry
The CPB Netherlands Bureau for Economic Policy Analysis released its monthly report today on world trade and world industrial production for the month of March. Here are some of the highlights:
1. World trade volume increased in March for the seventh consecutive month, bringing global trade to a new all-time record high (see chart). This was also the fourth month in a row that world trade was above the previous peaks during early 2008 when the U.S. recession and financial crisis started spreading, causing world trade to drop by 20% in 2009. World trade is now 3.4% above the previous peak in April 2008.
2. World trade in March was 8.4% above its year-ago level, and marked the 16th consecutive month of annual growth in trade starting in December of 2009. Compared to the cyclical low in May 2009, global trade has increased by nearly 30% through March of this year.
3. World industrial output declined by 0.8% in March from February, following a slight increase of 0.10% in the previous month. According to the CPB, the "March decline was caused by the disaster in Japan, where production plummeted by 14.9%," while growth in industrial output was positive in the United States, emerging Asia, and Latin America in March. For the first quarter of 2011, world output increased by 7% on an annual basis compared to the first quarter last year. Even with the Japan-related decline in March, world industrial output is 4.2% above the previous cyclical high three years ago in March 2008.
Bottom Line: Though we still face many economic uncertainties moving forward, the strong economic recovery to date for world trade and world output is encouraging and hopeful. The fact that both world trade and world output are now 3-4% above their early recession peaks is clear evidence that the world economy has fully recovered from the Great Recession and financial crisis of 2008.