WTO trade barometer at rock bottom
Historic lows have been recorded by the WTO’s trade barometer, but it seems we have now hit the floor, with trade stabilising and beginning to recover
The WTO’s Goods Trade Barometer has slumped to a historically low level for its June value, with the reading its lowest in recorded data going back to 2007. The WTO said that this is equivalent to the level reached during the aftermath of the 2008 financial crisis but it is seeing signs of stabilisation in the trade environment.
It expects this to translate into an 18-19% decline in merchandise trade in the second quarter of this year compared to the same period last year and it believes that the statistics imply a 14% drop in global merchandise trade volume between the first and second quarters of this year.
The WTO said that “Indices for automotive products (71.8) and air freight (76.5) are by far the worst on record since 2007.”
Although container shipping (86.9) is also well below stable or growth levels, which are indicated by score of 100 or above, the WTO did note export orders (88.4) are now showing signs of recovery with slight upward inflections in the most recent data. It also said that scores for electronic components (92.8) and agricultural raw materials (92.5) have not shown the same falls and remain more robust. It noted that port calls of container ships are now recovering as well, coming off a floor on May 2020 of an 11% year-on-year decline to around 7% lower year-on-year at the beginning of August.
The WTO therefore concluded in its analysis 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% 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.” Instead it seems likely now that the global trading situation is in for a long and rock road to recovery that will take a number of years and have a long upward inflection, rather than a sudden bounce back.