- The trade barometer rose to 100.7 this month from the dismal 84.5 recorded last August, a strong expansion following the collapse of trade in the second quarter
- The recovery in the barometer index was driven by export orders and agricultural raw materials, both of which finished firmly above trend
- Indices for container shipping and automotive products also recovered substantially to near trend
- Indices for air freight and electronic components remained below trend
The World Trade Organization’s (WTO) latest Goods Trade Barometer reading indicates a strong rebound in world merchandise trade, the sharp rise driven by a surge in export orders.
The Goods Trade Barometer’s current reading of 100.7 released this month marks a dramatic improvement from the 84.5 recorded last August, which reflected collapsing trade and output in the second quarter as lockdowns and travel restrictions were employed to fight the virus.
Readings of 100 indicate expansion in line with medium-term trends; readings greater than 100 suggest above-trend growth, while those below 100 indicate below-trend growth.
The latest reading indicates a strong rebound in trade in the third quarter as lockdowns were eased, but growth is likely to slow in the fourth quarter as pent-up demand is exhausted and inventory restocking is completed, said WTO.
Moreover, despite the positive reading, the strength of the trade recovery remains uncertain as second waves of COVID-19 are leading to renewed lockdowns that could trigger another round of business closures and financial distress.
The volume of world merchandise trade plunged in the second quarter of 2020, with a 17.2% year-on-year decline and a 14.2% drop between the first and second quarters.
Trade growth was already slowing since the fourth quarter of 2018, finally turning negative in the third quarter of 2019 and falling 3.0% year-on-year in the first quarter of 2020, a decline that only partly reflected the effect of the COVID-19 pandemic, WTO noted.
On a more positive note, progress has been reported in the development of a vaccine, but when and how it might be deployed is not yet known.
All of the barometer’s component indices were rising in the latest month, with some climbing above their medium-run trends while others remained depressed.
The recovery in the overall barometer index was driven by export orders (113.5) and agricultural raw materials (103.6), both of which finished firmly above trend. The indices for container shipping (102.0) and automotive products (94.6) also recovered substantially to near trend, while those for air freight (88.5) and electronic components (94.6) remained below trend.
The latest reading of the Goods Trade Barometer is consistent with the WTO’s revised trade forecast in October 2020, which predicted a 9.2% decline in the volume of world merchandise trade in 2020. This outcome would require a sharp rebound in the third quarter following the 17.2% year-on-year decline registered in the second quarter.