The Global Business Cycle is Transitioning

The third quarter of 2023 saw a mixed bag of economic activity around the world, with clear signs of recovery in China and the United States but persistent weakness elsewhere. In August 2023, there was a meager 0.4% increase in global industrial production when compared to the same month the previous year, as per the estimates provided by the Netherlands Bureau for Economic Policy Analysis (CPB).

However, trade volumes have not increased in a year and decreased by 3.8% in August when compared to the same month last year, a sign of stagnation that is consistent with a recession (“World trade monitor”, CPB, Oct. 25). Following a noticeable slowdown in the first half of 2023, the two largest economies in the world, the United States and China, indicated somewhat faster growth in the third quarter.

According to preliminary estimates, the real gross domestic product of the United States grew at an annualized rate of 4.9% during the three months from July to September, compared with a 2.1% increase during the same period in April and May. With a smaller contribution from goods (+1.1 percentage points), rising consumer spending (+2.7 percentage points), particularly on services (+1.6 percentage points), accounted for the majority of the increase.

The acceleration is in line with data from surveys of purchasing managers, which indicate that following the slightest of slowdowns in the second quarter, activity in the service sector grew in the third quarter. Although manufacturing activity was still falling, there were indications that it was about to enter a cyclical trough and expand quickly.

China and Asia 

After contracting in the second quarter, China’s economy also seems to have picked up steam in the third quarter. After four months of growth, the manufacturing purchasing managers index moved up to the second percentile in May and by September was in the 38th percentile for all months since 2011.

According to data from the Ministry of Transport, the amount of containers handled by China’s coastal ports increased by nearly 8% in September over the same month the previous year. September saw a 9% increase in China’s electricity generation over the same month last year, primarily due to large increases in power consumption by manufacturers (9%) and primary industries (9%), as well as service sector firms (17%).

Other regional economies are rising as a result of China’s recovery. Significant transshipment hub for trade between Asia and Europe, Singapore is also seeing an increase in freight volumes. In the past 12 months, the port has handled a record number of shipping containers, and in September of this year, those volumes increased by more than 4% over the previous year.

However, air cargo volume in Japan is still very low, with freight passing through Narita International Airport down 23% from a year ago and not showing any signs of rebounding. With a heavy weighting towards export-oriented companies, South Korea’s KOSPI-100 equity index is typically a good proxy for global trade. The index saw a strong rebound through the end of July. However, the index has since declined, which is in line with the global trade index’s renewed decline in volumes. After increasing during the summer, global container shipping rates have decreased once more in September and October, suggesting that demand is still weak.


Europe continues to be the weakest region due to its struggles with the combined effects of rising energy prices, trade flow disruptions brought on by Russia’s invasion of Ukraine, ongoing inflation, and rising interest rates. October saw a decline in business activity for manufacturers in the euro zone for the sixteenth consecutive month, and the purchasing managers index remained stuck in the 5th percentile for every month since 2007.

Energy-intensive manufacturers in Germany stated that production was still down 16% in August 2023 compared to January 2022, the month before Russia invaded, and that there was no indication that it would increase.

Reference : 

Kemp, J. (2023, October 30). Global business cycle is in transition. Reuters.