Goods demand slowing, global growth outlook likely to weaken : Report

NEW DELHI : Growth in global goods demand likely weakened to 1.5 per cent year-on-year (Y-o-Y) in May, according to a report by Axis Bank Research on Wednesday. This is below the near 3.5 per cent growth in the last two decades.

Global retail sales were “well below” pre-Covid trend observed between 2017 and 2019. “Adjusted for base distortions, growth in underlying demand in China remains much below pre-pandemic trends; sales in the EU (European Union) and Japan have flat-lined since the end of 2021 and continue to fall away from the pre-pandemic path,” said the report called Global Retail Sales Monitor.

“Sales in the US, which were supporting global goods demand, have weakened in the last two months and are now just 0.9 per cent above the pre-pandemic path.”

In the US, the share of goods in total consumption increased to 37 per cent during Covid-19 from 32 per cent earlier. This was due to fiscal support boosting aggregate demand and lockdowns restricting services. Now, the share of goods has again fallen to around 34 per cent.

“Whether excess household savings in the US have been depleted or not depends on trend-growth assumptions, but rising delinquency rates on US credit card debt and growth in debt outstanding point to growing pressures in economically weaker segments, especially given persistently higher rates,” said the report.

Excess savings in the US are on track to be depleted by March 2025. “Not only has the goods-to-services demand switch reversed, but the fiscal boost to growth is now fading rapidly. With restocking unlikely to boost factory output, the global growth outlook is likely to weaken, in our view,” it said.