New data from Tradeshift shows transaction volumes across global supply chains dropped at their fastest rate in eighteen months in Q3.

More than one million businesses use Tradeshift’s business commerce network to exchange invoicing and purchase order information relating to trade transactions across global supply chains. The company’s Q3 Index of Global Trade Health, which analyses the flow of these transactions, shows activity levels tracking 6 points below expected levels over the summer months (July-September).

Global slump in goods demand

A slump in demand for manufactured goods is undoubtedly a factor in the latest slowdown:

  • Manufacturing activity dropped 9 points below the baseline in Q3.
  • Freight demand softened to 6 points below the anticipated level.
  • Retail activity also dropped to 6 points below the expected range

    Eurozone and China bear the brunt

    Export-focused markets, including China and the Eurozone, are being hit the hardest by the slowdown in goods demand. Trade activity across the Eurozone slumped to 9 points below the expected level in Q3, compared to a deficit of 3 points in the previous quarter. In China, transaction volumes fell to 6 points below the baseline level, the first time activity has fallen into contraction territory this year.

    In the UK, activity mirrored the global trend. Transaction volumes slowed to 6 points below the baseline.

    US remains the growth outlier

    US trade activity also softened in Q3, but the rate of decline was far milder than in other markets. Transaction volume growth dropped to 3 points below the expected level in Q3, having surged to 3 points above the baseline in the previous quarter.

    “Globally, we’re seeing mounting evidence of an economy that’s preparing to land,” said James Stirk, CEO (interim) at Tradeshift. “Traditional manufacturing powerhouses across the Eurozone and China are facing a lot more turbulence than the US, where a robust domestic market means a softer landing seems more likely.”

    Emerging markets profit from supply chain diversification

    While the fall in trade activity has been consistent across the majority of major economies, others are benefiting from a reconfiguration of supply chains that has gathered momentum since the pandemic.

    Tradeshift’s data shows Vietnam in particular profiting from an accelerating ‘China +’1’ production policy among Western companies. Transaction volumes have risen seven times faster than the global average over the past year

    India, Malaysia and Mexico are also benefiting from supplier diversification with activity levels in each country rising at three times the global average over the past year.

    “Global trade has looked more local in 2023, but a new kind of globalization is also starting to emerge and new stars are rising,” said Stirk. “To thrive in this environment businesses will have to forge a new set of relationships in new jurisdictions. For supply chain operators, enhancing the digital connectivity between trading partners will play a key role in ensuring this transition happens seamlessly.”