Services trade weakens further in 2Q: new WTO indicator

Services trade weakens further in 2Q: new WTO indicator

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After an already weak first quarter in 2019, world trade in commercial services further softened through the second quarter as various services sectors except shipping lost momentum amid rising headwinds, according to the World Trade Organization’s (WTO) new Services Trade Barometer.

The index’s reading of 98.4 in June 2019 is below the baseline value of 100, suggesting that services trade continued to face strong headwinds leading into the second half of the year.

The barometer, launched on September 16, is part of the WTO’s efforts to develop new insights into services trade. Its June reading indicates a further weakening after services trade growth slowed during the first quarter of 2019. For comparison, during a recent peak in July 2018, the barometer registered 103.1.

Declines in most of the barometer’s component indices drove the second quarter softening, as they signaled a broad loss of momentum across various services sectors, said WTO.

The passenger air travel index (95.6), construction index (97.0), and global services Purchasing Managers’ Index (97.2) all fell further below trend in June. The financial services index (99.7) also dipped, finishing slightly below trend. The index for information and communication technology services (100.3), meanwhile, fell from well above trend in mid-2018 to on-trend in June.

In contrast, the container shipping index (100.8) was slightly above trend and rising in June, following a multi-month slowdown.

Despite the overall loss of momentum since the start of 2019, services trade has generally held up better than goods trade since the latter is more directly affected by recent trade tensions, noted the report. 

The Services Trade Barometer, which will be released two times per year, highlights turning points and changing patterns in world services trade. It provides an approximate measure of the volume of world services trade by adjusting nominal services trade values to account for changes in exchange rates and inflation.

Readings of 100 indicate growth in line with medium-term trends. Readings greater than 100 suggest above-trend growth while those below 100 indicate the opposite.

Illustration courtesy of WTO

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