Global merchandise trade has continued to recover in 2021 following a steep but brief pandemic-induced drop in the second quarter of last year, according to the latest WTO Goods Trade Barometer released on May 28, 2021.
The Goods Barometer is a composite leading indicator for world trade. It provides real-time information on the trajectory of merchandise trade relative to recent trends. The barometer’s current reading of 109.7 is nearly 10 points above the baseline value of 100 for the index. It’s up 21.6 points year-on-year, reflecting the strength of the current recovery. It also reflects the depth of the COVID-19 shock last year.
Meanwhile, In March 2021, all of the barometer’s component indices were above trend and rising. This, according to the WTO, highlights the broad-based nature of the recovery. Also, it is signaling an accelerating pace of trade expansion.
Specifically, the recent statistics show that Export orders (114.8), air freight (111.1) and electronic components (115.2) recorded the biggest gains among the barometer’s component indices. The WTO said all of these are indications of a highly predictive near-term trade developments.
Automotive products index
Also, the WTO noted that the strength of the automotive products index (105.5) may reflect improving consumer sentiment. Consequently, WTO explained that this is because confidence is closely linked to sales of durable goods. This is also true of agricultural raw materials (105.4), which are mostly made up of wood intended for housing construction.
Finally, the data show a strong showing for container shipping (106.7), which the WTO described as “more impressive”. This is because sea shipments held up well during the pandemic and had less ground to make up as a result.
The latest barometer reading is broadly in line with the WTO’s current trade forecast issued on March 31, 2021. The trade forecast predicted an 8% pickup in the volume of world merchandise trade in 2021. This followed a 5.3% decline the previous year.
Meanwhile, the WTO highlighted some challenges that could hamper the relatively positive short-term outlook for trade. These include regional disparities, continued weakness in services trade and lagging vaccination timetables, particularly in poor countries.
Expected rebound in Q2 2021
Global trade has been recovering since the second quarter of 2020. This was the time many countries impose lockdowns that triggered a steep drop in world trade. The volume of merchandise trade was down 15.5% year-on-year in Q2, when lockdowns were in full effect. However, by the fourth quarter, trade had surpassed the level of the same period in 2019.
Furthermore, the WTO hinted that it expects trade volumes to show very strong year-on-year growth in the first and second quarters of 2021. Meanwhile, the WTO is yet to release the quarterly trade volume statistics for the first and second quarters of 2021. This positive expectations leans partly on the recent strengthening of trade and the trade collapse last year.
However, COVID-19 continues to pose the greatest threat to the outlook for trade. As a result, the WTO warns that the new waves of infection could easily undermine the recovery. Global Global Global
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