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Panjiva: State of Trade Survey Outlines Trends to Track in 2014

Panjiva, a leading intelligence platform for global trade professionals, recently published its State of Trade Survey outlining the outlook for trade and sourcing in 2014.

The study looked at 100 of Panjiva’s members including buyers, sellers and analysts to determine today’s trends in trade. In general, respondents were optimistic about the economic outlook for the year ahead, concerned about wage inflation, and looking to Vietnam and Africa as new places to source.

Josh Green, Panjiva’s co-founder and CEO, said, “After an uneven recovery that’s moved forward in fits and starts, the sourcing community appears to be feeling remarkably good about the year ahead. A few months into 2014, trade activity would seem to validate that optimism. Through Q1, U.S. import activity was running 7% ahead of 2013.”

Roughly two-thirds of respondents noted optimism about the economy in the coming year compared to just half having that positive outlook in the 2012 survey. More than half said the global economy would be stronger in 2014 than in 2013, and only 8 percent thought the economy would be weaker.

The two economic concerns most respondents did have were dips in demand, which have generally plagued the industry, and rising wages in manufacturing hubs.

According to the report, “The International Relations and Security Network reports that wages in China were rising at an average rate of 18% in 2013, indicating that this is a well-founded concern. In spite of this, we still see no hard evidence of buyers relocating their manufacturing outside of China.”

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Half of the survey respondents classified themselves as “buyers” or being involved in procurement. Of those, nearly all reported sourcing from China or related countries, and cited increasing wages as a foremost concern.

“Buyers are anticipating cost increases in their supply chain in 2014, and sourcing in new geographies’ is the most popular opportunity for cost savings next year. Further, 61% of our buyer/other respondents said that sourcing in China had become more expensive over the past twelve months and nearly 75% said they were actively looking for suppliers outside China,” the report noted.

Panjiva asked respondents to designate which countries they felt would be new sourcing hotspots in 2014, and while Vietnam and India emerged as the top two, Africa also made the list. In the previous year’s survey, Africa did not even appear among the top ten new sourcing hotspots, but 9 percent of respondents in this survey noted interest in making in Africa.

“To dig into this more, we turned to the United Nations Comtrade site to look at the value of exports to China and the United States, the world’s two largest economies. The data shows that exports from Africa to the United States are decreasing, but exports from Africa to China are increasing. This new relationship is something we’ll be watching in 2014,” according to the report.

Green said, “It’s exciting to see that people are taking a serious look at sourcing from Africa. Of course, the capabilities that exist in Africa are limited and distributed unevenly, but organizations with the patience to place long-term bets would do well to start learning about this next frontier of sourcing.”

Considering the recent concerns about working conditions in Bangladesh, Panjiva decided to look at how the country’s garment industry tragedies like the Rana Plaza factory collapse actually affected trade.

Of the buyers who responded, 17 percent said they source from Bangladesh, and of those, 33 percent said they had shifted sourcing away from the country in the past 12 months. These numbers, Panjiva noted, were not an indication that there has been “a serious exodus from Bangladesh” as most companies are likely maintaining sourcing there, as the low costs can’t yet be beat.

“Our respondents are generally optimistic about 2014. They’re predicting that expenses will remain stable or rise, suggesting business expansion and increasing costs associated with trade. Labor costs are putting pressure on all sides of international trade. Though buyers have expressed interest in sourcing in new geographies, it’s not clear that they can quickly shift away from more expensive, established manufacturing markets. Suppliers are challenged by price-pressure from buyers and competitors, but still want to engage that challenge and do business with the United States,” Panjiva concluded.