Because consumer durables and investment goods tend to be heavily traded, the sharp uptick in firm and household saving in the fourth quarter translated into an equally steep and rapid fall in global trade.2
The world dollar value of goods trade declined some 30 percent between September 2008 and March 2009. Much of the decline reflected weaker trade in manufactured goods, the dollar value of which dropped 33 percent over the same period. The volume of exports of manufactured goods from member countries of the Organization for Economic Co-operation and Development (OECD), as a group, were down 10.8 percent in December 2008 from a year earlier.
Across OECD countries, the value of machinery and transport equipment exports fell 12.5 percent in December (year-on-year), representing a quarter of the total decline in goods exports. This very strong contractionary force was amplified to an uncertain degree by a shortfall in trade finance.
These short-term credits, which have a typical tenor of 120–180 days, are used to facilitate deals between distant partners with limited knowledge or business experience of one another. Although they cover only between 10 and 20 percent of all trade (most trade is conducted on an “openaccount” basis between regular business partners), short-term credits tend to be most important for small and medium-sized exporters. Indeed, the share of such transactions in regional trade represents an estimated 40 percent in the East Asia and Pacific region in part because of the prevalence of such small traders.
Recent research (Humphrey 2009) suggests that for a sample of 30 African firms, a lack of bank financing has not constrained exports, although anecdotal evidence from the same research suggests that firms in Latin America, the Caribbean, and Africa seeking to establish trade links have been more directly affected through this channel. As part of its efforts to temper the impacts of the crisis on developing countries the World Bank has put in place a number of initiatives to bolster trade finance. Overall, high-income and developing economies are in the midst of a steep and synchronized recession.
However, there are early signs that the rate of decline in output is slowing. Consumer confidence is improving in both high-income Europe and the United States, as are forward-looking indicators of business confidence. Similarly, the most recent monthly data suggest that the sharp slide in export growth in the Group of Seven (G-7) countries may be easing.
The value of goods exports in January and February fell by 3.4 and 2.4 percent, respectively, contrasted with 8.5 percent in each of November and December 2008; U.S. consumer demand rose in the first quarter of 2009; and data suggest that the slide in the U.S. housing market may have found bottom. Moreover, in both high-income Europe and North America a large part of demand is being met through inventory reductions rather than production—a process that cannot continue indefinitely and that if ended could add as much as two percentage points to GDP growth. However, these signs of recovery are tentative, and should there be another round of bad news, confidence and uncertainty could be aggravated, delaying the recovery (see below).
For example, business surveys suggest that investment growth will turn around in the second and third quarters of 2009. But, during 2008Q4 and 2009Q1, investment demand fell by almost 11 percent (38 percent at an annualized rate) in the United States.
2 Data refer to 28 OECD countries, excluding Canada, Greece, and Mexico, for which the OECD Stat does not report monthly data. The 28 countries are Australia, Austria, Belgium, the Czech Republic, Denmark, Finland, France, Germany, Hungary, Iceland, Ireland, Italy, Japan, the Republic of Korea, Luxembourg, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic, Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the United States. 
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