The Tradeshift
Index of Global
Trade Health
Q4 2023

The Tradeshift Index of Global Trade Health | Q4 2023

Global trade
outlookremainspredictably
unpredictable

Economists, business leaders and governments allover the world have had their fair share of change tomanage and decisions to make on how to navigate
the year 2023. Rampant inflation, rising interest rates,
ratcheting geopolitical tension and a series of extreme
weather events impacting key trade routes, have allcontributed to the overriding picture of uncertainty.
Though our report does not attempt to draw
unequivocal links between all these macro-indicators, itdoes offer a useful snapshot of how large organizations
are reacting to a variety of different pressures.
Though it’s too early to be certain, our latest datashows an upward movement that may well point toa more positive 2024 in front of us. Growth in tradeactivity across the Tradeshift platform improved to
4 points below the baseline in Q4, having sunk to 6
points below anticipated levels in the previous quarter.
Order volumes that had been in freefall since the end of2022 experienced a late surge in Q4, rising at 5 points
above the expected range, marking the most significant
quarterly performance swing in over two years.
In the US, trade activity has cooled of late, but seems
to have stabilized at 3 points below the baseline. Withorders exceeding expectations by 6 points in Q4, weshould see invoice traffic follow suit in Q1 pushingoverall transaction volumes back into growth territory.
The apparent rebound in new orders is surprising,
especially in the face of the prevailing narrativeof diminishing demand across global supply
chains. Nevertheless, this pattern consistently
played out not just in the US, but also acrossthe Eurozone and, to a lesser extent, the UK.

year. Alternatively, this could prove to be a oneoff correction in an otherwise declining picture.
Another possibility is that businesses arerestocking certain items in anticipation of potential
disruptions to supply chains in the coming
months. Global supply chains are grapplingwith disruptions at two vital trade corridors– the Panama Canal and the Suez Canal.
Carriers are rerouting ships, adding a week ormore to transit times. The surge in order volumes
may reflect a proactive response by supply
chain operators aiming to avert a recurrence of
the issues experienced during the pandemic.
Finally, it’s important to note that while global
trade activity did gain some momentum in
Q4, the overall growth in ordering volumes
and invoice traffic throughout 2023 remains
significantly below the anticipated range.
This shortfall in demand is most evident in
China. After a solid, if unspectacular start to theyear, activity has fallen sharply over the past
two quarters with transaction volume growth
ending the year 5 points below the baseline.
Q4 may yet prove to be a turning point for
global trade, but the balance of evidence
suggests that we have some distance totravel before we can start making any
predictions on the timing of a recovery.

James Stirk
CEO
Tradeshift

Should the overall upswing in order volumes persist
into the next quarter, it could signify the nascentstages of an upturn in global trade over the coming

p.3

2022
The Tradeshift Index of Global Trade Health | Q4 2023

Key findings
at a glance1. Global trade activity recovered to 4
points below the baseline following asignificant slump in the previous quarter.
2. A surge in orders fueled momentum in Q4,
with the volume of new orders rising by aremarkable 5 points above the expected range.
3. The US continued to outperform othermajor economies. Order volumes tracked
6 points above the expected range in Q4.
Overall transaction volumes stabilized at
3 points below the anticipated levels.
4. Trade activity across the Eurozone also
recovered sharply following an alarming 9-point
slump in Q3. Trade activity tracked 4 points
below the baseline while order volumes roseat 5 points above the expected range.

5. In the UK, order volumes rose at a more modest
1 point above the expected range. Total tradeactivity remained consistent with previous
quarters at 5 points below the expected range.
6. Trade activity in China continued tosuffer in Q4, finishing the year 5 points
below the expected range.
7. Demand across the transport and logistics sector
stabilized at 6 points below the baseline in Q4.
Activity across the manufacturing sector also
remained 6 points below anticipated levels.
8. Spending on software and IT services continued
to outperform other sectors. Transactions acrossthe sector rose at higher-than-expectedlevels for the second successive quarter

p.5

The Tradeshift Index of Global Trade Health | Q4 2023

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

p.7

The Tradeshift Index of Global Trade Health | Q4 2023

Global trade rebounds
from
its most recent slump
Transaction volumes - quarter on quarter

growthvolumes
indexed- quarter
againstonhistorical
trendsindexed against historical trends
Transaction
quarter growth
20

10

0

-10

-20

-30
Q4’20

Q1’21

Q2’21

Q3’21

Q4’21 Q1’22

GlobalUS

In Q4, global trade activity registered a modest
improvement, standing 4 points below the anticipatedrange. This reflects an upturn in momentum from theprevious quarter, during which transaction volumes
plummeted to 6 points below the baseline. Much ofthis improvement stems from a significant surge inorder volumes over the quarter.
Major Western economies seem to be mirroring
the global trend. Transaction volumes across theEurozone, which had declined to 9 points below
expectations in Q3, recovered slightly in Q4 to
conclude the year 4 points below the baseline.
And while trade activity in the US has shown signsof cooling in recent quarters, the rate of decline
appeared to level out in Q4 at 3 points below the
expected level.

Q2’22

Q3’22

EUR

Q4’22

UK

Q1’23 Q2’23 Q3’23 Q4’23

CNY

While Q4 brought relief to the recent slump in global
trade activity, caution prevails. The overall subdued
growth pattern observed is largely consistent with thepicture that has emerged over the past two years – areturn to real-term growth is unlikely in the near term.
Softened demand continues to weigh heavily on exportfocused economies, including China, where the second
half of the year has proven particularly challenging for
local manufacturers. Official data1 shows factory outputs
across the territory suffered their worst contraction in six
months in Q4. Our own data shows transaction volumes
across the region remained firmly in the red zone in Q4,
trailing 5 points below the expected range.

1 Bloomberg; 23/12/2023: China Factory Activity
Posts Worst Contraction in Six Months

Order surge could prove a
double-edged sword for suppliers
Invoice and order volumes - quarter on quarter comparison, indexed against expected growth
Q4’20
Q1’21
Q2’21
Q3’21
Q4’21
Q1’22
Q2’22
Q3’22
Q4’22
Q1’23
Q2’23
Q3’23
Q4’23
-30.0

-20.0

-10.0

0.0
Invoices

Order volumes have been tumbling since thebeginning of 2022. We saw the first sign of a break inthis pattern in Q4, as activity surged to a remarkable 5
points above the anticipated range.
Order volume patterns give us clues about how largeorganizations view the next six months. A big spikein activity is therefore potentially significant since itsuggests large organizations are betting on an uptickin demand for goods over the coming year.
It’s too early to start drawing any firm conclusions
based on the results of a single quarter’s data. But iforder volumes do continue to trend in 2024, then thesustainability of this uptick will hinge on suppliers’
ability to ramp up activity to handle fresh demand. This
presents a potential challenge, especially considering
the diminished cash reserves of smaller suppliers
following an extended period of reduced orders.

10.0

20.0

30.0

OrdersExtended payment terms, often reaching 120 days or
more, also contribute to a lag of a quarter or more before
suppliers reap any benefits of heightened ordering
activity. In Q4, invoice volumes remained 3 points below
the baseline, and the longer this delta persists, the moreworking capital will come under pressure.
The true significance of the recent surge in order volumes
on a broader recovery in global trade will only become
evident in the next quarter. What is clear at this moment,
however, is that any recovery must be accompanied byinnovative financing mechanisms that expedite the flowof working capital to suppliers, so that they are equipped
to react to an uptick in demand.

p.9

Q4
momentumdeep-dive
Quarter-on-quarter world tradeperformance across key territories

p.11

The Tradeshift Index of Global Trade Health | Q4 2023

US: Settling in for a soft-landing
US trade activity - quarter on quarter index scores

97

94

Below expected range

106

Within expected range

Above expected range

Swing vs previous quarter:0-3

A mid-year resurgence in activity across US supply
chains petered out at the end of the year, as transaction
volumes remained 3 points below the baseline. But, asharp uptick in orders in Q4 suggests US businesses
remain confident that domestic consumers will continue
to spend freely in 2024.
Constituting roughly two-thirds of the US GDP,
domestic consumer spending holds significant sway,
and analysts at Bank of America1 are among many
who believe consumer spending will remain relatively
strong in 2024.
The December report from the Conference Board2
noted a five-month high in US consumer confidence,mirroring a nearly 14% surge in the University of

1 Investopedia; 02/01/2024: Analysts Expect Consumer
Spending Will Support Soft Landing, Moderate Growth in 2024
2 The Conference Board; 20/12/2023: US Consumer
Confidence Increased Again in December+11
Michigan’s benchmark Consumer Sentiment Index3 the most substantial increase in over three decades.
This positive momentum aligns with lower inflation
and a tapering of interest rate hikes.
Although Q3’s sharp decline in orders contributed
to a dip in invoice traffic during Q4, an anticipated
rebound in Q1, fueled by fresh orders reachingsuppliers, suggests a potential normalization. If thismaterializes, the mid-2023 surge starts to appear lessas a momentary blip in a cooling outlook and more as
an indication of underlying strength.
The sustainability of this momentum, however, hinges
on various factors (including those listed above). The
outcome of the upcoming election later this year
will likely also play a pivotal role in determining the
trajectory ahead.

3 University of Michigan; 22/12/2023: Sentimentsoars as consumers expect easing of inflation

Eurozone: Order recovery helps
steady the ship after Q3 slump
Eurozone trade activity - quarter on quarter index scores

96

94

Below expected range

Within expected range

103

Above expected range

Swing vs previous quarter:

+5

+4

+11

A minor recovery in Eurozone activity provided
a positive sheen to an otherwise challenging
trading landscape heading into 2024.

volumes remain elevated then Q4 may indeed mark the
beginning of the end to the current downward cycle. The
omens suggest otherwise, however.

Transaction volumes crept back to withintouching distance of the expected range in Q4,
having plunged sharply in the previous quarter.
The impetus for this momentum stemmed
largely from a recovery in orders, mirroring a
global pattern observed in the same period.

A recent survey conducted by the Financial Times1 foundtwo-thirds of economists believe the EU is already ina recession. Sluggish demand continues to exact a tollon the region’s manufacturers, with S&P’s latest data2
revealing a contraction in manufacturing activity acrossthe region in December.

A rollercoaster second half of the year is symptomaticof the volatility that has defined the trade landscapefor Europe’s export-heavy economy over the past
two years. While the latest data appears promising,
the pattern of a significant decline in one quarter
followed by a modest recovery in the next echoes
what our data illustrated in the first half of the year.

While the recent interest rate hike appears to have curbed
inflation, the Eurozone confronts a delicate balance ofchallenges, hinting at another year of volatility ahead.

Taking a broader perspective, the overarching trend
reveals subdued growth from a low starting point.
A more definitive assessment awaits in Q1. If order

1 Financial Times; 26/12/2023: Eurozone set for
weak growth next year, say economists
2 HCOB, Eurozone PMI; 02/01/2024: Eurozone manufacturingsector finishes 2023 with another strong reduction in output

p.13

The Tradeshift Index of Global Trade Health | Q4 2023

UK: Still waiting for thetides to change
UK trade activity - quarter on quarter index scores

95

94

Below expected range

101

Within expected range

Above expected range

Swing vs previous quarter:+1
Order volumes have finally tipped back into
growth territory after a two-year hiatus, but
the year-end report card for UK trade activity
reveals a lingering cloud of uncertainty.
In parallel with the Eurozone, the UK exhibits a caseof low growth emanating from a low starting point.
However, unlike the Eurozone’s pattern of trade
marked by peaks and troughs, the UK’s landscapeis notable for its relative lack of movement.
Transaction volumes nudged up by a point in
Q4, concluding the year 5 points below thebaseline, maintaining a steadfast position that has
scarcely deviated for the past eighteen months.
Correspondingly, invoice traffic remained static in
Q4, resting 6 points below the anticipated level.
The stagnant trade atmosphere in the UK is mirrored
in recent economic data, with the UK economy

0+5
contracting in the third quarter of 2023. The Bankof England’s1 forecast of zero GDP growth in
2024 underscores the prevailing challenges.
Manufacturers, in particular, bear the weightof the current gloom, experiencing a 17th
consecutive month of output decline, according
to the latest Purchasing Managers’ Index2.
It’s not all doom and gloom, however. Inflation
is falling faster than many had anticipated,and economists expect that trend to accelerate
further in 2024. The UK services sector is also
well-placed to benefit from any uptick in the
global macroeconomic environment. A General
Election later on in the year also brings withit the potential for a change in direction.

1 Bloomberg; 2/11/2023: BOE’s Bleak UK Outlook
Lifts Bets on Sharp Rate Cuts in 202
2 The Guardian; 2/1/2024: UK factory output lower than
expected after fall in domestic and export orders

Manufacturing slump spreads
to logistics providers
Quarter-on-quarter transaction volumes - Index scores by sector
T&L

Manufacturing

Retail

Tech

Q3’22

92

89

91

98

Q4’22

89

93

97

101

Q1’23

91

99

88

99

Q2’23

98

97

93

87

Q3’23

94

91

94

101

Q4’23

94

94

96

102

significantly
below expectation

below
expectation

withinexpected range

Demand for freight capacity levelled off at 6 points
below the expected range in Q4. This suggests thatthe recent rise in orders observed at a macro-levelis not yet significant enough to change the overall
pattern of subdued demand over the past eighteenmonths.
Restrictions on capacity through the Panama Canaland geopolitical tension affecting transit routes in the
Middle East have added an extra dimension to thesector’s current challenges – a sector that had only justbegun to find its footing following the pandemic.
The prospect of further volatility will be a bitter pill forthe manufacturing sector. A slight uptick in momentum
proved insufficient to pull it out of contraction
territory. S&P data1 indicates that manufacturing
activity contracted in almost every major economy in
December, underscoring the persistent challenges.

1 Reuters; 02/01/2024: Global factory
activity ended 2023 on a soft noteabove
expectation

significantly
above expectation

Trade activity across the retail sector performed
slightly better with transaction volumes rising to justbelow the expected range in Q4. In the US, consumer
spending over the vital Christmas season rose 3 percent year on year2.
In a noteworthy defiance of prevailing gloom, thetechnology sector continued its positive trajectory, withtransaction volumes surpassing the anticipated range
for a second consecutive quarter.
Gartner3 anticipates this trend to gain momentum in
2024, projecting an 8 per cent increase in worldwide
IT spending to $5.1 trillion. The surge is attributed toinvestments in cloud, cybersecurity, AI and automation,
which are considered critical for enhancing operational
efficiency and addressing IT talent gaps.

2 Wall St. Journal; 26/12/2023: Shoppers
Kept Spending This Holiday Season
3 Gartner; 18/10/2023: Gartner Forecasts
Worldwide IT Spending to Grow 8% in 2024

p.15

The Tradeshift Index of Global Trade Health | Q4 2023

Perspectives
on the roadahead

FINAL THOUGHTSSupply chains areheading back into
choppy waters.
James Stirk
CEO
Tradeshift
Companies that crafted new supply chain
strategies in response to the COVID-19 pandemic
have found themselves compelled to implement
those plans more swiftly than anticipated – driven
by disruptions to critical trade corridors throughPanama and the Red Sea.
A confluence of extreme weather events andgeopolitical tensions typifies a period where theterm ‘permacrisis’ has become part of the lexicon.
Although rampant inflation may have peaked, 2024
is poised to be another year of upheaval, amplified
by elections in major economies, including the US,
fostering an overarching sense of unpredictability.
Amidst a growing set of variables, maintaining
focus on the broader strategic picture becomeschallenging. However, the foundational principles
of resilience, notably agility, remain paramount in
navigating such volatile scenarios.
Businesses need to look at how they increase thevelocity of decision-making across their supply
chain so that they can adjust their activities
according to conditions that remain in a heavy
state of flux. The only way they can do this is bybecoming more digital.

By leveraging digital connectivity, companies canenhance their risk management strategies within the
supply chain, moving beyond ‘best-guess’ policies toinformed decision-making with visibility shared acrossall stakeholders.
Danone is a great example of a company utilizing thedigital connectivity it has established across its supplierbase through Tradeshift, to share vital inventory andforecasting information across the entire supply chain.
Ultimately, the most efficient and resilient supply
chains manifest as digitally networked ecosystems
encompassing suppliers, distributors, retailers andall other manufacturer partners. This model allows
real-time information exchange, accurate demand
forecasting and effective communication among
partners.
Such initiatives are typically driven by buyers, but
any attempt to force suppliers into adopting systems
that have traditionally been designed solely forbuyers is likely to fall flat. Digitizing the buyer-supplier
relationship requires both parties to feel that they’rederiving real value from making the transition.
Tradeshift’s philosophy prioritizes the value proposition
for suppliers, and it’s this approach that enables us todigitize entire supply chains at speed and scale. Our
partnership with HSBC, a world-first in the provisionof embedded fintech services, further bolsters thecompelling value proposition for businesses joining theTradeshift network.

p.17

The Tradeshift Index of Global Trade Health | Q4 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 compares B2Btransaction volumes (orders processed from buyers
and invoices processed from suppliers) submitted
via the Tradeshift platform against a ‘baseline’ we’vecreated by analyzing medium-term seasonal trends inthe transaction 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.

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.

We acknowledge that there are limits to how
accurately our view of what’s 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 offers 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.

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’s 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 business commerce platform that redefines the way
B2B buyers and suppliers connect, transact and grow. We’re a leader ine-invoicing and AP automation, offering tools for compliant e-invoicing in
50+ countries, including China. We’re an innovator in B2B marketplaces
and embedded fintech services that bring value, opportunity andgrowth to any business that joins the network. Tradeshift’s vision is toconnect every company in the world, creating economic opportunity
for all. Today, the Tradeshift platform is home to a rapidly growing
community of buyers and sellers operating in over 190 countries.
Find out more at: www.Tradeshift.com©2024 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 © 2024 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.