Global Merchandise Trade Rebounds But Still Risky Times Ahead
The World Trade Organization’s (WTO) latest Goods Trade Barometer, released on November 27, signals a rebound in global merchandise trade volumes, primarily propelled by an upsurge in automobile sales, production, and electronic components trade. Despite this positive trend, the global economic landscape remains mired in uncertainty due to mixed economic indicators and escalating geopolitical tensions.
Standing at 100.7, the current barometer index surpasses its previous reading of 99.1 from August, nearing the baseline of 100. This elevation implies that merchandise trade volumes are expected to align with the medium-term trend in the latter half of 2023. However, the uncertainty is still pronounced, fueled by inconsistent economic data and intensifying geopolitical strife.
The Goods Trade Barometer serves as a composite leading indicator, offering real-time insights into the trajectory of global merchandise trade against recent trends. Readings above 100 indicate higher-than-trend trade volumes, while readings below 100 suggest a decline or imminent drop in trade.
In the second quarter of 2023, the volume of world merchandise trade remained stagnant, showing a marginal 0.2% increase from the previous quarter but a 0.5% decline year-on-year. Anticipations for the third quarter are more optimistic, thanks to accelerated GDP growth in the United States and China, though the sluggish economy of the European Union continues to dampen global demand.
Regardless of these factors, a significant year-on-year trade growth is expected in the fourth quarter, contrasting the lower trade volumes from the same period last year, which were affected by high energy prices, soaring interest rates, and pandemic-related disruptions. This aligns with the WTO’s October 5, 2023 forecast, predicting a 0.8% increase in global trade volume for 2023. While the forecast remains stable, the trade outlook faces increased downside risks, particularly in light of recent events in the Middle East.
The barometer’s component indices present a mixed picture, with some indices like those for automobile sales, production (110.0), and electronic components trade (109.8) climbing well above the trend. In contrast, indices for air freight (100.3), export orders (99.4), and container shipping (98.0) hover around the trend line. The raw materials index (95.6), however, falls below the trend, possibly due to the impact of high interest rates on weakening property markets and the surging demand for electric vehicles, which could explain the robust performance of the automotive and electronics sectors. See full report here.
