World services trade continued to grow into the second quarter of 2022, indicating resilience to the conflict in Ukraine, according to the WTO’s Services Trade Barometer released today, Thursday, June 23, 2022.
The latest reading of 105.5 is firmly above the previous reading of 102.5 in September 2021 and comfortably over the baseline value of 100 for the index.
According to the World Trade Organization (WTO), this is signaling that services trade is likely to post sustained gains in the second quarter, once official statistics for the period are available. The main drivers of the services trade are passenger air travels and communication technology services.
“Among the Services Trade Barometer’s component indices, the passenger air transport index (117.1) registered the strongest gain, contributing to the above-trend reading in the global index. Strong showings in the services Purchasing Managers’ Index (105.1) and information and communication technology services (104.2) also helped lift the services barometer reading”.WTO
The World Trade Organization stated that even though the financial services index (101.7) remains above trend, it appears to have lost momentum recently, possibly due to sanctions on the Russian Federation in connection with the conflict in Ukraine.
According to the recent release of the services barometer readings, other indices that remain above the 100 baseline value mark include container shipping (101.5) and construction (101.1) services.
Services Trade Activity Index
Recent developments in services trade were illustrated by the Services Trade Activity Index, which provides an approximate measure of the real volume of world services trade accounting for changes in prices and exchange rates.
The index has shown slow but steady growth since services trade bottomed out in the second quarter of 2020 in the early stages of the global pandemic.
The index continued to move towards recovery in the fourth quarter of 2021 with a 15.6% year-on-year increase, although it remained 8.9% below its pre-pandemic peak in the second quarter of 2019.
The Services Trade Barometer highlights turning points and changing patterns in world services trade. Unlike its counterpart for goods, the fluctuations registered by the services indicator coincide with movements in actual trade flows, rather than anticipating them.
Readings of 100 indicate growth in line with medium-term trends. Readings greater than 100 suggest above-trend growth while those below 100 indicate the opposite.
The new readings show that the Services Trade Barometer is outpacing the Goods Trade Barometer, which points to a possible shift in consumption patterns away from goods and back toward services as the COVID-19 pandemic eases.
The Goods Trade Barometer reading of 99.0 in March 2022 was slightly below the baseline value of 100 for the index, which is a forward-looking composite of real-time indicators, suggesting continued slow growth in merchandise trade.
The last data released on goods trade reduced earlier optimism in the barometer reading in February 2022, but suggested that trade might have been approaching a turning point, with stronger growth expected in the near future.
The anticipated upturn may have been short-circuited by the conflict in Ukraine, which started in late February and triggered sharp rises in food and energy prices, which tend to reduce real incomes and lower economic growth.