The Tradeshift
Index of Global
Trade Health
Q2 2023

The Tradeshift Index of Global Trade Health | Q2 2023

The current
squeezeon working
capitalis the biggest
threat to
global trade’s
recoveryGlobal trade has faced significant challenges in
adapting to the realities of an economy scarred bya vicious circle of rampant inflation, rising instability,
and unpredictable consumer spending patterns.
Good news has been in short supply, but the modest
uptick in momentum we’ve observed in our Q2 Index
opens up the potential for a new narrative, particularly
if you happen to be based in the United States.
Transaction volumes across supply chains in the world’s
largest economy grew at their fastest pace in morethan two years in Q2. New orders appear to be flowing
at a more consistent rate following a post-pandemic
inventory glut. Supplier invoice volumes have also
begun to recover after a long period of sluggish growth.
Consumer spending is fueling the recession-defying
performance in the US. And that may well prove tobe the case in China too, where transaction volumes
have ramped up since the beginning of the year.
Trade activity within Chinese supply chains tracked
1 point above the expected range. However,while China’s activity is growing, it’s not growing
as fast as many people hoped when the Chinese
government first announced an end to Covid
prevention measures. Global demand for its
products is waning, and that’s having an impact.
Globally, our data suggest that while conditions have
improved slightly compared to Q1, the balance ofrisk remains towards the downside. Total transaction
volumes were 4 points below the baseline in Q2, andthere’s little to suggest a breakout any time soon.

Activity levels in the UK and the Eurozone
gained some momentum, but it’s been morethan two years since transaction volumes ineither region have come close to surpassing
the expected range. Instead, what we
see is low growth from a low base.
Invoice volumes on our platform have started
to drop as buyers settle into a pattern of lower
ordering. For suppliers, a slowdown in orders
isn’t the end of the world as long as the patternis predictable. Far more damaging is the
restriction in access to financing that typicallyaccompanies a period of economic uncertainty.
Many traditional financiers are either capping theircapabilities or scaling back. In the case of SMEs,
we see banks looking to add greater collateral or
security for lending, which increases fixed costs.
Democratizing access to working capital isfundamental to our vision of a trade network thatprovides economic opportunity for all. We havealready shown that embedding financial services
into trading relationships can have a transformative
impact on the growth prospects of small to medium
enterprises. But we knew we could do more.
We now have the opportunity to expand and scale
access to financial services available to businesses
through our network, injecting much-needed agility
into a global trading environment characterized
by near-constant change. Be certain that this will
be a key focus for us over the coming months.

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Q4 2023
2022
The Tradeshift Index of Global Trade Health | Q2

Key findings
at a glance1. Trade activity in the US is leaving the rest of theworld in its wake. Transaction volumes were
3 points above the expected range in Q2.
Domestic consumer spending is driving growth.
2. Global transaction volumes improved
slightly in Q2, but activity levels are still
4 points below the baseline and appear
to be settling at a lower growth rate.
3. Order volumes remained flat at 2 points
below the expected range. Invoice volumes
continued their recent sharp decline putting
supplier liquidity under pressure.
4. Demand for freight capacity also appears tohave found its level following three consecutive
quarters of steep decline. Activity climbed
back into the expected range in Q2, butshowed little sign of further acceleration.

5. Waning demand for manufactured goods
has taken the shine off China’s grandreopening. Transaction volumes rose to
1 point above expectation in Q2, but
progress is more steady than spectacular.
6. Activity across the Eurozone recovered
slightly in Q2 after a very shaky start tothe year. Trade activity across the regionrose 3 points below the expected range,
but the outlook remains volatile.
7. UK order volumes rebounded sharply, but
overall activity levels remain lacklustre.
Transaction volumes grew at 5 points
below the expected level in Q2 andare struggling to find another gear.

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The Tradeshift Index of Global Trade Health | Q2 2023

Volatility
snapshot
Quarterly growth in world tradeactivity across the Tradeshift network
indexed against historical trends.

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The Tradeshift Index of Global Trade Health | Q2 2023

Mixed signals: US shines, China steadies,
global trade sees modest improvement
Transaction volumes - quarter on quarter

Transaction
volumes- quarteron quarter
growthindexed against historical trends
growthindexedagainsthistorical
trends
20

10

0

-10

-20

-30
Q4’20

Q1’21

Q2’21

Q3’21

GlobalQ4’21 Q1’22
US

Q2’22

EUR

Q3’22

Q4’22

UK

Q1’23 Q2’23

CNY

A remarkable turnaround in the US was among

The Eurozone and the UK followed the global trend, withthe highlights in an uneven set of results to emerge

trade activity in the Eurozone 3 points below expectations

from our Q2 data. US transaction volumes grew 3

in Q2. Our Q1 Index showed trade activity across thepoints above the expected range as trade activity

region slumping to 8 points below the expected range. A

appeared to shrug off recent challenges, including

less pronounced uptick in the UK saw transaction volumes

the inventory glut, which weighed down ordering

improve to 5 points below the baseline in Q2 compared to aactivity during the second half of 2022.

fairly dismal -7 points in Q1.

Trade activity in China held onto the momentum it

A glass-half-full assessment of this most recent quarterhad built in Q1 following the lifting of Covid prevention
measures across the country. Transaction volumes

suggests an improving outlook. Current data from the ECB2
shows that inflationary pressure is beginning to subside.

grew at 1 point above the baseline in Q2.

But low consumer spending is having a significant impact

China might be growing, but its grand reopening hasn’t

Eurozone fell into a mild recession at the beginning of thequite ignited as expected. Data from Caixin1 shows

year and expects conditions to remain challenging in the

manufacturing activity slowed rapidly in June. Our datasecond half of 2023. The forthcoming Q3 Index will provide

points to a recovery that’s steady rather than spectacular.

a clearer picture of whether the Q2 improvement reflects

Globally, a more modest improvement in trade activity

on demand. Revised figures from Eurostat3 show that the

tangible progress or merely a rebound from Q1’s slump.

appears to align with the cautious tone that economic
forecasters have struck this year. Total transaction volumes
across the Tradeshift platform grew slightly faster in Q2
compared to the previous quarter. Nevertheless, overall
growth remains low, at 4 points below the expected range.

1 CNBC; 2nd July 2023: “China’s factory activity grew more
slowly in June, Caixin survey shows”
2 Reuters: 30th June 2023: “Euro zone inflation falls again in Juneas energy prices tumble”
3 Eurostat: 8th June 2023 “GDP down by 0.1% and employment
up by 0.6% in the euro area”

Ordering patterns stabilize,
but suppliers will need support
Invoice and order volumes - quarter on quartercomparison, indexed against historical trends

Invoice and order volumes - quarter on quarter comparison, indexed against historical trends

Q4’20
Q1’21
Q2’21
Q3’21
Q4’21
Q1’22
Q2’22
Q3’22
Q4’22
Q1’23
Q2’23
-30.0

-20.0

-10.0

0.0
Invoices

Ordering activity across the Tradeshift platformremained 2 points below the expected range in
Q2. On the one hand, the data shows a level ofconsistency returning to ordering patterns that havelong been the subject of extreme volatility. On the other
hand, the clouded economic outlook and consumer
belt-tightening have left large buyers cautious.
Order volumes are not slumping in the same way as
they did at the end of 2022. Instead, we’re seeing themsettle into a much lower rhythm. A large backlog oforders means it has taken time for this kind of correction
to impact suppliers. The emerging gap between orders

10.0

20.0

30.0

OrdersResearch by accountancy firm BDO4 claims thatnine in ten mid-sized businesses are halting
growth plans due to difficulty accessing capital.
In a fragile economy, keeping liquidity flowing to small
businesses is one of the most effective means to stave
off a potentially painful recession that could tip many
suppliers into bankruptcy. Buyers can contribute byensuring that their systems and processes do not delay
supplier payments. Suppliers who find themselves
excluded from traditional capital arrangements
should also explore the growing range of alternative
financing methods emerging to bridge this gap.

and invoices indicates that suppliers are now facing
increased pressure on their order books and cash flow.
Suppliers may benefit from more stable orderingin the coming months if the current ordering
pattern persists. However, their ability to capitalizeon this stability is a separate concern.
4 BDO; 26 June 2023: Nine in ten mid-sized businesses halting
growth plans due to difficulty accessing capital

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The Tradeshift Index of Global Trade Health | Q2 2023

Q2
momentumdeep-dive
Quarter-on-quarter world tradeperformance across key territories

p.11

The Tradeshift Index of Global Trade Health | Q2 2023

US: Softer-landing
beckons
US trade activity - quarter on quarter index scores

103

103

Below expected range

98

Within expected range

Above expected range

Swing vs previous quarter:+9+9Consumer confidence improved in June5 to its highest
level since January 2022. That optimism is reflected in
the robust growth in trade activity we’ve observed overthe past quarter.
Order volumes remained steady, slightly below the
expected range in Q2, indicating that supply chains aregradually finding a more regular rhythm after the recent
bullwhip cycle.
Suppliers are reaping the benefits of these moreconsistent ordering patterns. As predicted in our Q1
Index, invoice traffic in the US recovered strongly, rising
to 3 points above the expected range.

-1

The resilience of the US economy has caught many
forecasters by surprise. Economists at Goldman Sachs6
now say there’s a 25% chance of a US recession in thenext 12 months, down from their earlier projection of
35% shortly following the failure of Silicon Valley Bankin March.
The outlook remains mixed, however. Consumer
spending is beginning to slow according to theCommerce Department7. Manufacturing orders arealso showing signs of weakness, with data from Markit
Economics8 posting a significant contraction in activity
during June. Higher input costs and muted demand areweighing on exports. The US’s ability to achieve a softlanding will likely depend on the sustained strength ofits domestic market.

5 The Conference Board; 27th June 2023: “US Consumer 		Confidence Improved Substantially in June”

7

New York Times; 30th June 2023: “Consumer Spending Stalled
Last Month

6 Goldman Sachs; 6th June 2023: “Why a US recession has
become less likely”

8 Trading Economics; June 2023: “United States Manufacturing
PMI”

Eurozone: Modest improvements
mask underlying volatility
Eurozone trade activity - quarter on quarter index scores

97

97

Below expected range

Within expected range

96

Above expected range

Swing vs previous quarter:+5
The Eurozone has been on something of a roller
coaster ride in recent quarters. Trade activity rose
sharply at the end of 2022. A new year brought withit a dose of reality. As we enter the second half of2023, activity levels are showing signs of recovery,
yet the future remains highly unpredictable.
Examining recent patterns in ordering activity
provides some insight into what might unfold
later this year. While order volumes in Q2
improved slightly compared to the previous
quarter, they remained in the red zone after asignificant slump in the preceding quarter.

+8+2

Consecutive quarters of low ordering activity arepoised to impact suppliers in the latter part of 2023.
Considering that much of the growth observed in Q2 isderived from supplier invoices, we may see another dip
next quarter.
Europe’s industrial heartlands are also suffering due
to diminishing global demand for manufactured
goods. In Germany, business sentiment has weakened
significantly since May, according to a report by the IFO.9
The US and China have been able to call on thestrength of their domestic markets, but consumer
spending has faced a significant squeeze acrossEurope. This particular rollercoaster ride will likely havea few twists and turns in store before it comes to a halt.

9 IFO Institute; 26th June 2023: “ifo Business Climate
Index declines”

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The Tradeshift Index of Global Trade Health | Q2 2023

UK: Stuck inreverse gear
UK trade activity - quarter on quarter index scores

95

95

Below expected range

99

Within expected range

Above expected range

Swing vs previous quarter:+2
UK trade activity appears to be stuck in a rut. Overthe past two years, transaction volumes haveremained at consistently low levels, with the mostrecent quarter showing only a modest improvementcompared to Q1. Unfortunately, there are no clear
signs of a breakthrough from the current malaise.
That’s not to say there aren’t some positives to takefrom the latest data. Order volumes experienced
something of a return to form, finishing the quarter
comfortably within the expected range. The firmcaveat, however, is that this follows an alarming
slump in Q1. What we’re really observing is apattern of orders that has now found its level.

10 Sky News; 1st June 2023: “Manufacturing downturn deepens
amid weak demand for UK goods”

0+9Data from S&P Global10 shows UK exports havebeen dropping steadily for the past 16 months. And
much like the Eurozone, UK businesses don’t havea strong enough domestic market to make up forthe slump. Inflation also remains stubbornly high.
New customs checks due to come into force inJuly could make life even more difficult for Britain’s
exporters, who will face significant paperwork andenhanced transport checks. Although the UK has
managed to avoid slipping into a recession thus
far, the current evidence suggests that it needs
to find another gear to maintain this record.

Transport and logistics sector
finds a new rhythm
Quarter-on-quarter transaction volumes - Index scores by sector
T&L

Manufacturing

Retail

Tech

Q1’22

101

75

94

86

Q2’22

96

97

97

101

Q3’22

92

89

91

98

Q4’22

89

93

97

101

Q1’23

91

99

88

99

Q2’23

98

97

93

87

significantly
below expectation

below
expectation

withinexpected range

above
expectation

significantly
above expectation

Our latest Index indicates that global trade is graduallyadapting to a new rhythm characterized by lower
demand. This shift is also reflected in the transport andlogistics sector, where demand appears to align withthe overall picture.

But while spending data provides a rosy picture, higher
inflation often means consumers are simply spending
more to get less. Volume sales are down11, and thisaligns with the lower-than-expected growth in activity
we’ve seen across the sector over the past six months.

Demand for freight capacity has been in freefall for the
past three quarters. This pattern leveled out in Q2 astransaction volumes across the sector tipped back into
the expected range.

Demand fell sharply across the technology sector
in Q2. There’s certainly some evidence thatorganizations are starting to take a more considered
and cautious approach to technology spend.
According to research by Techtarget12, cybersecurity,
cloud, data management, and automation willremain the areas businesses are most likely toring-fence for investment in the coming year.

Similar adjustments can be seen in the manufacturingsector, which underwent a significant correction during
the latter half of 2022. Since then, activity levels havelargely stabilized, albeit from a lower base.

11 Retail Week; 23rd June 2023: “Retail sales rise in May but
volume declines”

12 Techtarget: 10th April 2023: IT spending priorities point to cyber,cloud and data

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The Tradeshift Index of Global Trade Health | Q2 2023

Perspectives
on the roadahead

FINAL THOUGHTS:

Now is not the time
to watch and wait
James Stirk
Chief Revenue Officer,
Tradeshift
There’s a running joke that ‘experts’ correctly
anticipated seven out of the last three macroeconomic
events. Unfortunately, it’s doubtful that theirsuccess rate will improve in the future.
Economists started the year predicting aninevitable and painful global recession. Consensus
is now drifting, and predictions for the next
six months are as good as a coin flip.
We must accept the reality of higher volatility in ourbusiness environment, but the core principles ofresilience and agility remain as relevant as ever.
According to analysts at Gartner13, businesses
should adopt an offensive approach to theirdigital and IT strategy. Investing in the right
digital initiatives can mitigate the negative effects
of uncertainty. Gartner specifically highlights
automation as a prime area for investment.
The advantages are apparent. For instance,
e-invoicing solutions offer cost-saving
potential, operational efficiency, and improved
cash flow management, making them highly
appealing during economic downturns.
By accelerating the invoice-to-payment cycle,
businesses gain more opportunities to optimize theirworking capital. Better and more accurate data canbe utilized for strategic decision-making across thebusiness. Digital connectivity also supports morecollaborative relationships with suppliers, many ofwhom may be experiencing financial pressures.

13 Gartner; June 2023: Recession Advice: Go on the Offensive
With IT Investments

As CFOs seek ways to reduce costs, automation
eliminates the need to scale resources up anddown based on market conditions. However,Gartner’s analysts are optimistic about digitalization
for reasons beyond cost reduction. Recent
events, such as the pandemic, have highlighted
the importance of digital investments.
When the pandemic first hit, businesses that had
already invested in digitalization projects found it
far easier to adapt to an almost overnight shift inworking conditions. Yet, that didn’t mean that thesecompanies coasted through the crisis relying on
their past tech investments—quite the opposite.
According to a KPMG survey14, digitally leading
companies were more inclined than non-digitalones to increase their technology investments due
to COVID-19. Organizations that were “very” or“extremely effective” at using digital technologies saw
a 50% increase in spending between 21% and 50%.
In the short term, businesses that digitize willencounter fewer struggles. The most astutecompanies will also view this period of uncertainty
as an opportunity to gain or extend their competitive
advantage. Digitalization provides businesses
with agility, offering them a range of options. And
in challenging times, the business with the mostoptions at its disposal typically emerges victorious.
With better insights, faster decision-making,agile sourcing, stronger partnerships, and thepotential to explore new revenue streams, the true
opportunity lies in seizing the moment. Businesses
that are already ahead of the digital curve will
now intensify their efforts. It’s not the time topassively observe; it’s the time to take action.

14 KPMG; 22 September 2020: “COVID-19 forces one of thebiggest surges in technology investment in history”

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The Tradeshift Index of Global Trade Health | Q2 2023

About
Tradeshift’sIndex ofGlobal Trade
HealthPurpose

Methodology

Many of the world’s largest buyers and their
suppliers use Tradeshift’s trade technology
network to exchange digitized purchasing andinvoicing information. The data these transactions
yield provides us with a unique awarenessof trading activity between businesses.

The Index of Global Trade Health comparesbusiness-to-business transaction volumes (orders
processed from buyers and invoices processedfrom suppliers) submitted via the Tradeshiftplatform against a ‘baseline’ we have created byanalyzing medium-term seasonal trends in thetransaction data that flows across our platform.

Tradeshift’s Index of Global Trade Health analyzes
anonymized world trade data flowing across
our platform to reveal a timely perspective of
how external events are impacting businessto-business commerce around the world.
We acknowledge that there are limits to how
accurately our view of what is happening on our
network can reflect how complex global supply
chains are reacting to a variety of external factors.
What our world trade data does provide is a
useful snapshot that provides clues as to whatmight be happening to the global economy.
The patterns we see in our data become morevaluable as we combine them with other thirdparty data and expert insight, something which
you will see us draw on throughout this report.

A reading that meets the baseline indicates growthin line with expectations against historical trends.
Readings greater than and below the baseline
indicate above-trend and below-trend growth.
Looking at the data in this way helps give asense of how volatile activity is across different
sectors and geographies. For example, a sudden
rise in orders might trigger orders to jump at
a rate that exceeds what we would consider
normal. By contrast, waning demand might
trigger volatility in the opposite direction.
We consistently strive to improve and evolve
the accuracy of our analysis. As a result, it
is possible that from time to time, you may
see small revisions to historical numbers
reported in previous versions of the Index.

p.19

About Tradeshift
Tradeshift is the cloud-based supply chain platform that transforms theway B2B buyers and sellers connect, transact and trade. We’re a leader
in e-invoicing and AP automation, offering full international compliancein 50+ countries, including China. We’re also an innovator in B2B
marketplaces and embedded fintech services that bring value, opportunity,and growth to any business that joins the network. Headquartered in San
Francisco, Tradeshift’s vision is to connect every company in the world,
creating economic opportunity for all. Today, the Tradeshift platform ishome to a rapidly growing community of buyers and sellers operatingin more than 190 countries. Find out more at: www.Tradeshift.com©2023 Tradeshift Holdings Inc. or a Tradeshift affiliate company. All rights reserved.
The Tradeshift Global Health of Trade Index and this report are copyrighted
works. This document is protected by U.S. and international copyright andintellectual property laws. It may be linked to and referenced with thefollowing attribution “Tradeshift © 2023 Tradeshift Holdings Inc.”
Tradeshift is a registered trademark or trademark of Tradeshift Holdings Inc.
in the United States and/or other jurisdictions. All other marks and names
mentioned in this article may be trademarks of their respective companies.
This report is intended for information purposes only, is based on a segment of industry
data, and may not prove to be an accurate representation of total trade volumes.
Tradeshift makes no warranty or representation as to the accuracy of this information.