Capgemini Consulting

  Steering Team:
Roy Lenders, Capgemini Consulting Netherlands

Prepared and edited by:
Hardeep Singh, Capgemini Consulting India
Pranav Toshniwal, Capgemini Consulting India

Executive Summary: Global Trade Flow Index - Q3 2011

- Weak US economy, debt crisis in the Euro zone and worries about inflation coupled with tighter monetary policy in Asia have clouded the outlook for global economy in Q3 2011
- Weakening flows of goods and services reflected in reduction of global trade by 1.3%, on QoQ basis in Q3 2011
- Euro zone debt crisis and an appreciating Euro constrained the exports from European nations, as total trade reduced by 2% in Q3 2011, on QoQ basis
- US recovery slowed down significantly in Q3 2011 due to its financial turmoil; and US dollar is expected to weaken further especially against growing market currencies, impacting its trade volumes
- Japan’s economic growth improved in Q3 2011 as reconstruction spending and improved exports provided a boost to overall growth
- Amongst BRIC nations, the outlook for Indian and Chinese economies remains positive, driven by heavy investments and exports

Major economies saw their trade dwindle in the third quarter of 2011, with growth falling down to sub-zero levels

Key developments

- Global trade growth decelerated further as trade volumes dropped by 1.3% QoQ, to touch 2,106 billion USD in Q3 2011
- The deceleration in import and export growth affected all the G7 nations and the emerging markets, except China and India
- Euro zone experienced a drop in their total trade by 2% QoQ in Q3 2011, as growth of exports was constrained by an appreciating euro
- Due to current financial turmoil, US dollar is expected to weaken further especially against growing market currencies, impacting its trade volumes, with total trade reducing by 2% QoQ in Q3 2011
- India was the only country to see a sharp pickup in export growth, from -4.5% in Q2 2011 to 1.2% in Q3 2011, led by demand for cars, petroleum products and precious stones

Index

US slipped to second position with China emerging as the leading economy in the third quarter of 2011

Indian economy performed well in Q3 2011 moving one rank up, backed by strong domestic demand and improving exports (2/2)

While rising commodity prices and weakening dollar impeded US’s growth, reconstruction spending and resumption of exports helped Japan to grow in Q3 2011

While local economies are still growing, global trade is declining – are we seeing the early impact of protectionism and a trend back to local-for-local manufacturing?


Preview Window for Q4’11

World trade is expected to grow in Q4 2011 although the risks of sovereign debt crisis in Europe still remains

Key Risks

- Inflation (high food prices and volatile commodity markets) is a key risk for both emerging and developed markets
- Ongoing US fiscal imbalances also run the risk of creating instability in financial markets
- Geopolitical instability and sovereign debt crisis in Euro zone could be the key risks to overall outlook of the global business environment
- As growth slows in most of the leading economies and investor confidence weakens, there is a risk for world economy to step back into ‘‘recession zone”

Highlights from some of the major institutes for the global economic outlook for the remainder of 2011 and for 2012

Appendix

Country Profiles

China


United States


Germany


Japan


France


The Netherlands


Italy


United Kingdom


Korea


Belgium


Russian Federation


Canada


India


Mexico


Spain


Australia


Brazil


Sweden


Austria


Poland


Switzerland


Czech Republic


Norway


Methodology & Base Data Files


Methodology and Data Sheets


Forecasting Methodology

While predicting the Global trade index, we follow the following steps as mentioned below:

a. LOGEST Calculation:

a. Apply LOGEST Formula (=Logest (Historical Data Range)-1) to the historical data of trade, GDP, Domestic and foreign market, until the latest available quarter
b. From the derived LOGEST value, predict the next quarter data by multiplying it with the previous quarter and adding the factor into the previous quarter data

b. Adjustment Factor Calculation:

a. Calculate the variance of prediction against the actual for last 4 quarters and calculate the average variance
b.Multiply the average variance % with the predicted figures to get the adjusted forecasting

c. Finally, predict the Global trade index based on the adjusted figures


Comparison of ‘Forecasted and Actual values’

• Forecasted number : This number is arrived by using LOGEST Forecast Methodology, basis numbers available for previous quarters
• Initial numbers - Data for current quarter: These are the actual values available on OECD’s website. It comprises estimated number for some of the countries (estimates are either provided by OECD or some estimates are made by our team in India basis analyst report/ news articles)
• Revised number : Updated actual numbers available on OECD’s website. OECD’s website is regularly updated by actual numbers made available from each individual country (incorporating any seasonal adjusted changes, if any)

Variance between Actual vs. Predicted values as per LOGEST method



About Capgemini Consulting

With more than 115,000 people in 40 countries, Capgemini is one of the world’s foremost providers of consulting, technology and outsourcing services. The Group reported 2010 global revenues of EUR 8.7 billion.

Together with its clients, Capgemini creates and delivers business and technology solutions that fit their needs and drive the results they want. A deeply multicultural organization, Capgemini has developed its own way of working, the Collaborative Business ExperienceTM, and draws on Rightshore®, its worldwide delivery model.

Capgemini Consulting is the Global Strategy and Transformation Consulting brand of the Capgemini Group, specializing in advising and supporting organizations in transforming their business, from the development of innovative strategy through to execution, with a consistent focus on sustainable results. Capgemini Consulting proposes to leading companies and governments a fresh approach which uses innovative methods, technology and the talents of over 3,600 consultants worldwide.

For more information: http://www.capgemini-consulting.com/

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