Kiel Institute presents novel trade indicator
The Kiel Institute presents the Kiel Trade Indicator, a novel leading indicator for international trade based on real-time data. It estimates the expected imports and exports for 75 countries, the EU as well as the worldwide trade in goods in total. The calculation is based on movement data from container ships in several hundred ports and sea regions, which an algorithm programmed at the Kiel Institute evaluates using artificial intelligence.
”With the Kiel Trade Indicator, the Kiel Institute provides an economic leading indicator of unprecedented quality and quantity,” said the Institute’s President Gabriel Felbermayr. ”High-frequency data offer us the great opportunity to observe or forecast economic swings with a very small time lag. Business and politics, for example, can thus react much earlier to emerging disruptions and take countermeasures.”
The Kiel Trade Indicator is based on real-time data of maritime container traffic worldwide and shows nominal, seasonally adjusted changes in trade compared to the previous month. The data covers docking and departing ships for 500 ports worldwide. In addition, ship movements in 100 maritime regions are analyzed and the effective utilization of container ships is derived from draught information. Country-port correlations can be used to generate forecasts for imports and exports—even for countries without their own deep-sea ports.
The evaluation of the data is supported by artificial intelligence and machine learning. With increasing data, the Kiel Trade Indicator algorithm builds up a wealth of experience and can independently improve estimation errors. The forecasting quality of the Kiel Trade Indicator thus continues to increase over time. Machine learning also makes it possible not only to provide estimates of the current state of trade, but also to forecast future trade flows.
Supply shortfalls of the Corona crisis detected at an early stage
Even today, the Kiel Trade Indicator has a low statistical error compared to other leading indicators. It is also available earlier, is much more comprehensive and, with the help of big data, relies on a uniquely large database.
Therefore, in spring 2020, for example, the indicator would have provided an early indication of the loss of supplies from Asia to Germany triggered by the Corona crisis. Likewise, it would have signaled the surprisingly rapid resurgence of trade activity at an early stage. This would have reduced the high and expensive planning uncertainty for companies, and governments could have aligned their business assistance programs accordingly. Especially in such disruptive developments, the leading indicator can help to contain economic damage.
The Kiel Trade Indicator is updated twice a month. On the 19th, the trade data for the current and the following month will be calculated and there will be a press release on this occasion. On the 3rd, the trade data for the previous and the current month will be updated. All unilateral trade forecasts, i.e. country-to-world, of the Kiel Trade Indicator are available at www.ifw-kiel.de/tradeindicator (http://www.ifw-kiel.de/tradeindicator). Bilateral forecasts, i.e. country-to-country, can be made available upon request.
Sharp decline in Chinas exports in April
With the latest data update on May 3, the Kiel Trade Indicator for April 2021 signals a month-on-month increase in exports for Germany and the EU. China will likely face a decline.
For Germany, the indicator for April 2021 exports points to a small uptick of 2.6 percent of as compared to the previous month. The value for imports stands at zero. In the European Union (EU), the increase of export activity of 3.3 is likely more pronounced, imports gain similarly with 3.2 percent.
“For Germany and the EU, international trade remains the central support for the economy,” says Vincent Stamer, head of Kiel Trade Indicator. “The Suez Canal blockage does not appear to have grave ramifications for trade flows of Germany and Europe—at least in April.”
In the USA, imports likely increase strongly by 6.1 percent. The indicator shows a value for exports indistinguishable from zero. China must expect a sharp decline in exports around minus 8.8 percent and a moderate gain in imports of 3.2 percent.
“For the first time in over a year, containership movements show a setback from China’s robust export growth. This may be because of ships’ delays following the obstruction of the Suez Canal. It is also plausible that consumers in Europe and North America begin shifting their consumption behavior away from consumer goods made in China and towards services offered locally such as restaurant visits. As vaccination rates increase, more and more services are offered again,” says Stamer.
For world trade overall, a modest increase of 0.8 percent can be expected.
The next update of the Kiel Trade Indicator will take place on May 21 (with press release) and on June 3 (without press release).
For more information on the Kiel Trade Indicator and forecasts for all 75 countries, visit www.ifw-kiel.de/tradeindicator (http://www.ifw-kiel.de/tradeindicator).
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