Capital flows drop faster than trade flows

Some interesting charts from Council on Foreign Relation’s Brad Setser’s blog.  In comparing the drop in trade (export, import) to the flow in financial flows, he used “used the January trade data to estimate the q1 fall in exports and imports (down 22% and 27% respectively, y/y and in nominal terms) and I plotted trade flows against private capital flows (I reversed the sign on outflows, and subtracted “private” treasury purchases from the inflow data*). The last data point on the capital flows side is from the fourth quarter…”

fin-flows-vs-trade

For a more accurate comparison, he scaled it to GDP and he found a bigger drop.

fin-flows-gdp

The main observation here is that the capital outflows have been bigger, much bigger than the trade flows. Setser also observed how the drop in capital preceeded the drop in trade.  No surprises I suppose.  Apart from the drop in demand, it is financing that becomes one of the biggest barriers when it comes to a well functioning trade system.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s