WTO goods trade barometer shows positive trends but remains subdued

Business a.m

The World Trade Organisation (WTO) has issued a report suggesting that global merchandise trade may begin to show some improvement in the first quarter of 2024, although the outlook remains uncertain due to the impact of geopolitical tensions.

The WTO’s Goods Trade Barometer, which measures trade volume trends, registered a value of 100.6 in the first quarter of 2024, above the quarterly trade volume index but only slightly above the baseline value of 100. This suggests that global merchandise trade is expected to improve gradually in the coming months, but only slightly and only if there are no further disruptions due to regional conflicts or political tensions. The report notes that while the current reading is an improvement over previous months, it still represents a very fragile recovery that could be easily derailed by unforeseen events.

The Goods Trade Barometer is a composite indicator designed to predict the near-term trajectory of global merchandise trade, using a combination of real-time trade data and statistical modelling. The barometer’s value is a reflection of the current and projected strength of merchandise trade compared to the trend. A barometer value of more than 100 indicates that trade volumes are above trend, while a value of less than 100 suggests that trade volumes have fallen below trend or are expected to do so in the coming months.

The WTO reported that global merchandise trade volumes declined by 0.4 percent in the third quarter of 2023 compared to the previous quarter, and fell by 2.5 percent year-on-year. This decline was due primarily to the fact that the growth in global trade volumes in the first three quarters of 2022 was unusually strong, resulting in a year-on-year comparison that did not reflect the actual trajectory of trade volumes in the third quarter of 2023.

Merchandise trade volumes from January to October 2023 were mostly unchanged compared to the start of the year, growing by just 3.2 percent over the previous two years. This relatively flat growth is more pessimistic than the WTO’s most recent forecast of October 5, 2023, which predicted 0.8 per cent growth in global merchandise trade for 2023.

The barometer’s component indices, which track specific aspects of trade such as export orders and shipping, offer a more detailed picture of the state of global trade. The export orders component (101.7) indicates that export demand is slightly above trend, while the air freight component (102.3) suggests that global air freight volumes are growing slightly faster than expected. On the other hand, the container shipping (98.6) and raw materials (99.1) components show that container shipping and raw materials trade remain slightly below trend.

The index for automobile production and sales remains above trend (106.3), although recent data suggests a loss of momentum in this area. Meanwhile, a recovery in electronic components trade, which was previously expected to be significant, has been revised down (95.6).

Global trade is forecast to pick up in 2024 after a year of below-average growth in 2023, but the future trajectory remains uncertain due to a range of factors, including the ongoing conflict in Ukraine and economic headwinds in major markets such as China and the US.