Global merchandise trade continues to see robust recovery from the shock of the COVID-19 pandemic as WTO’s Goods Trade Barometer hits record high in latest reading.

The latest barometer reading is 110.4, the highest on record since the indicator was first released in July 2016, and up more than 20 points year-on-year. The rise in the barometer reflects the strength of current expansion in trade and the depth of the pandemic-induced shock in 2020.

Although it is notable that the index lies well above trend, it has started to rise at a decreasing rate, which could signal a peaking of upward momentum in trade. All the indicators used were above trend in July 2021, illustrating the broad-based nature of the recovery.

Specifically, indices for air freight- 114.0, container shipping- 110.8 and raw materials- 104.7 continued on the ascendancy, presaging faster than average trade growth.

Automotive products index scored 106.6 indicating a rise despite the fall in production and sales of cars in some countries. This is as a result of the shortage of semi-conductors. Similarly, the shortage reflected in a relatively small decline in the electronic components index.

Furthermore, from the readings, new export orders index rise slowed more definitively reaching 109.3. Thus, affirming the indication that the pace of recovery is likely to trend downwards in the near term.

goods trade — Source: WTO Good’s Trade Barometer

Merchandise trade on the rise but headwinds prevail

Dwelling on the upside trends, the rise in the air freight index reflects a rebound in air transport. This is due to the easing pandemic-related restrictions in some developed countries. However, the index could slide down again and this time more suddenly, if the spread of COVID-19 variants forces the re-imposition of restrictions.

This notwithstanding, the recovery has been marked by regional disparities. North America, Europe and Asia regained lost ground and other regions lagged behind.

Compared with the barometer reading on March 31, 2021, the latest readings reflect similar behaviour in world merchandise trade. Showing consistency with the latest reading, the March 31, 2021 reading foresaw an 8 percent increase in merchandise trade volume.

Since it registered a sharp decline in the second quarter of 2020, global goods trade has grown steadily. The volume of merchandise trade was up 5.7 per cent year-on-year in the first quarter of 2021.

So far, this represent the largest jump since the 5.8 per cent rise in past decade. The latest barometer reading suggests that goods trade will see an even larger year-on-year increase in the next quarter as trade volume data for that period becomes available.

However, global trade outlook continues to be overshadowed by downside risks. These include regional disparities, continued weakness in services trade, and lagging vaccination timetables, particularly in poor countries.

COVID-19 continues to pose the greatest threat to the outlook for trade. The emergence of new variants and the spread of infection could easily undermine the recovery.