Recent goods trade barometer report released by the WTO on August 19, shows a 14% drop in global merchandise trade volume between the first and second quarters of this year.
The current barometer reading of 84.5 is 15.5 points below the baseline value of 100 for the index and 18.6 points down from the same period last year. This reading is the lowest on record in data going back to 2007, and at par with the nadir of the 2008-09 financial crisis.
This is however, broadly consistent with WTO statistics issued in June, which estimated an 18.5% decline in merchandise trade in the second quarter of 2020 as compared to the same period last year.
The exact extent of the fall in trade will only be confirmed later this year when official trade volume data for the period from April to June becomes available.
“The WTO’s June statistics implied a 14% drop in global merchandise trade volume between the first and second quarters of this year”
WTO
This estimate, together with the new Goods Trade Barometer reading, suggest 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.
As uncertainty remains elevated, in terms of economic and trade policy as well as how the medical crisis will evolve, an L-shaped recovery is a real prospect. This would leave global trade well below its pre-pandemic trajectory.
The report further states that, flights worldwide fell nearly 80% between late February and mid-April, with international flights declining more than domestic ones. Flight totals have gradually recovered through the end of July but remain around 40% below their level at the start of the year. Commercial flights are an important indicator of the state of the global economy since they are closely related to both goods and services trade.
The Goods Trade Barometer
The Goods Trade Barometer is designed to gauge momentum and identify turning points in world trade growth. Readings of 100 indicate growth in line with medium-term trends; readings greater than 100 suggest above-trend growth, while those below 100 indicate below-trend growth.
In normal times, the Goods Trade Barometer anticipates changes in the trajectory of world trade by a few months. However, the sudden, unexpected nature of the COVID-19 crisis may have profoundly altered economic behavior and patterns, reducing the predictive value of the standard set of indicators.
The WTO further stated that they continue to monitor trade developments during the crisis, including unconventional and high-frequency economic indicators.
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