The sharp contraction in global trade witnessed over the last few months has resulted in the Goods Trade Barometer of the World Trade Organisation (WTO) to sink to the red zone and shows no signs of the decline bottoming out in the near future.
The Goods Trade Barometer, which provides real-time information on the trajectory of world merchandise trade relative to the recent trends, shows that the volume of world merchandise trade is likely to dampen in 1H2020, as the COVID-19 pandemic continues to disrupt the global economy.
From the baseline value of 100, the index currently stands at 87.6, down from the 95.5 recorded just two months ago. According to the WTO, the May 2020 value is the lowest to be recorded since the launch of the indicator in July 2016.
Readings of 100 indicate a growth in line with medium-term trends; readings greater than 100 suggest above-trend growth, while those below 100 indicate below-trend. The barometer aims to capture momentum and identify turning points in global trade growth.
The indicator is in line with the WTO’s trade forecast issued in April, which projected a decline in world merchandise trade of between 13 and 32 percent in 2020.”
All of the barometer’s component indices are currently well below trend,” the WTO said, pointing out that the automotive products index of 79.7 was weakest of all. The slump was attributed to collapsing car production and sales in major economies. It noted that the sharp decline in the forward-looking export orders index of 83.3 suggests that trade weakness will persist in the short-run.
“Declines in the container shipping (88.5) and air freight (88.0) indices reflect weak demand for traded goods as well as supply-side constraints arising from efforts to suppress COVID-19,” the WTO said.
According to the analysis, only the indices for electronic components (94.0) and agricultural raw materials (95.7) show signs of stability, although they too remain below trend.
The WTO pointed out that international trade was already witnessing a contraction in 2019 and was pulled down by persistent trade tensions and weakening economic growth.
The WTO trade statistics show that the volume of world merchandise trade shrank by 0.1 percent in 2019, marking the first annual decline since 2009, the year of global financial crisis. The agency said that trade was relatively weak in the final quarter of 2019 but stressed this is unlikely to have been influenced by COVID-19, which was first detected very late in the year. (SAA)