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WTO goods barometer confirms steep drop in trade
21 Aug '20
3 min read
Pic: WTO
World merchandise trade likely registered a historic fall in 2020 second quarter, according to the latest goods trade barometer of the World Trade Organisation (WTO), a gauge of trends in global trade. Additional indicators point to partial upticks in world trade and output in the third quarter, but the strength of any such recovery remains highly uncertain.
An L-shaped, rather than V-shaped, trajectory cannot be ruled out, WTO said in a press release.
The current barometer reading of 84.5 is 15.5 points below the baseline value of 100 for the index and 18.6 points down from the same period last year. This reading, the lowest on record in data going back to 2007 and on par with the nadir of the 2008-09 financial crisis, is broadly consistent with WTO statistics issued in June, which estimated an 18.5 per cent decline in merchandise trade in the second quarter of 2020 as compared to the same period last year.
The exact extent of the fall in trade will only be confirmed later this year when official trade volume data for the period from April to June becomes available.
All of the barometer's component indices remain well below trend, with many registering historic lows, although some have begun to stabilize. Indices for automotive products (71.8) and air freight (76.5) are by far the worst on record since 2007.
Container shipping (86.9) also remains deeply depressed. Export orders (88.4) show signs of recovery as this index has turned upward. Meanwhile, indices for electronic components (92.8) and agricultural raw materials (92.5) have held up relatively well, showing only modest declines.
WTO's June statistics implied a 14 per cent drop in global merchandise trade volume between the first and second quarters of this year. This estimate, together with the new barometer reading, suggest that world trade in 2020 is evolving in line with the less pessimistic of the two scenarios outlined in the WTO's April forecast, which projected that the volume of merchandise trade this year would contract by 13 per cent compared to 2019.
However, as WTO economists warned in June, the heavy economic toll of the COVID-19 pandemic suggests that the projections for a strong, V-shaped trade rebound in 2021 may prove overly optimistic. As uncertainty remains elevated, in terms of economic and trade policy as well as how the medical crisis will evolve, an L-shaped recovery is a real prospect.
This would leave global trade well below its pre-pandemic trajectory.
An L-shaped, rather than V-shaped, trajectory cannot be ruled out, WTO said in a press release.
The current barometer reading of 84.5 is 15.5 points below the baseline value of 100 for the index and 18.6 points down from the same period last year. This reading, the lowest on record in data going back to 2007 and on par with the nadir of the 2008-09 financial crisis, is broadly consistent with WTO statistics issued in June, which estimated an 18.5 per cent decline in merchandise trade in the second quarter of 2020 as compared to the same period last year.
The exact extent of the fall in trade will only be confirmed later this year when official trade volume data for the period from April to June becomes available.
All of the barometer's component indices remain well below trend, with many registering historic lows, although some have begun to stabilize. Indices for automotive products (71.8) and air freight (76.5) are by far the worst on record since 2007.
Container shipping (86.9) also remains deeply depressed. Export orders (88.4) show signs of recovery as this index has turned upward. Meanwhile, indices for electronic components (92.8) and agricultural raw materials (92.5) have held up relatively well, showing only modest declines.
WTO's June statistics implied a 14 per cent drop in global merchandise trade volume between the first and second quarters of this year. This estimate, together with the new barometer reading, suggest that world trade in 2020 is evolving in line with the less pessimistic of the two scenarios outlined in the WTO's April forecast, which projected that the volume of merchandise trade this year would contract by 13 per cent compared to 2019.
However, as WTO economists warned in June, the heavy economic toll of the COVID-19 pandemic suggests that the projections for a strong, V-shaped trade rebound in 2021 may prove overly optimistic. As uncertainty remains elevated, in terms of economic and trade policy as well as how the medical crisis will evolve, an L-shaped recovery is a real prospect.
This would leave global trade well below its pre-pandemic trajectory.
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