Trade flows are likely to slow this year as consumers worried about the financial crisis cut back spending and a cyclical downturn bites into exports and imports, economists said.

But the crisis itself has so far had only a moderate impact on trade.

Exports and imports have been slowing markedly since the second quarter after growing strongly in the first, said Michael Finger, senior economist at the World Trade Organisation (WTO).

"What we know already from the first seven-eight months is it's not a catastrophe, it's weakening. I don't see any panic or huge changes, it's relatively gradual," he told Reuters.

Trade would of course be vulnerable to a prolonged seizing-up of the banking system as commerce is financed by credit. The picture is not quite as favourable as at first sight, because export and import figures earlier this year were inflated by record fuel prices.

In addition, business confidence has fallen to a three-year low in Germany, Europe's biggest economy which is powered by exports, and has also tumbled in the second biggest economy, France.

The head of shipping firm Excel Maritime Carriers Ltd warned last week that banks were no longer lending to fund trade, and cargoes were being left stranded on docks even though the demand for goods is there.

But the slowdown in trade reflects a cyclical economic downturn rather than the immediate impact of the financial crisis, economists said.

"So far we've been fairly lucky when it comes to the effect on fundamental trade from the financial crisis," said Fredrik Erixon, head of Brussels trade policy think-tank ECIPE.

"I think trade volumes are certainly going down but that has principally been a consequence of the global economic slowdown rather than early signs of financial problems."    

True, there have been some warning signs. Japan announced its biggest monthly trade deficit in 25 years last week as exports to the United States fell a record 22 percent in August.

But US exports are on a roll, up 18.3 percent so far this year despite a trade deficit fuelled by record oil prices. Consumers in many rich countries are cutting their spending because of worries about their financial assets and pensions, falling house prices and recent record fuel prices.

But companies making capital goods such as trucks or steel are doing well on strong investment demand from emerging markets, especially oil producers, Finger of the WTO said. Trade between Asian countries is holding up well, he said.

There are risks ahead for trade, economists said.

* Oil prices have now fallen more than a quarter from their July peak, which could prompt Gulf states and Russia to rein in spending, especially if the decline continues;    

* The financial turmoil of the past few weeks, which could dent consumer confidence further, is not yet reflected in trade statistics;    

* Retailers like Wal-Mart Stores Inc will place their orders for the pre-Christmas buying season over the next couple of months. If their reading of consumer confidence is gloomy that would hurt Asian exporters of electronics goods.

* Several European economies are slowing or falling into recession, provoked by the pricking of housing bubbles or the financial crisis in the cases of Ireland, Spain and Britain.

Trade between European countries accounts for one third of the world total. As a result the WTO is likely to revise down its projection of trade growth this year from the six-year low of 4.5 percent it forecast in April when it reviews the figure next month. - Reuters