On 18 August 2021, the WTO published the latest reading of the WTO Goods Trade Barometer. The Barometer provides real time information on trends in trade in merchandise relative to the recent trajectory. It is therefore an indicator that runs ahead of the conventional statistics on trade volume and can be useful in giving a first sign of any change in trend in world goods trade. The most recent reading published on 18 August is 119.4 which is the highest reading since the first release of the indicator in July 2016.
The rise in the reading on the trade barometer is a consequence of the depth of the economic shock in 2020 caused by the pandemic and the strength of the current expansion in goods trade. The index is however starting to rise at a decreasing rate and could therefore be nearing the peak of its upward momentum. This latest barometer reading is generally consistent with the WTO’s most recent trade forecast of 31 March, which projected an 8% increase in 2021 the volume of world merchandise trade in 2021 after there had been a 5.3% decrease in 2020.
The component indices of the barometer which include container shipping, raw materials, air freight, automotive products and electronic components were above trend in the latest reading, showing that the recovery is broad based. The indices for air freight (114.0), container shipping (110.8) and raw materials (104.7) continued to rise, indicating average trade growth that was faster than average.
There was a rise in the automotive products index (106.6) even though car production and sales fell in some countries in July 2021 due to a shortage of semiconductors. There was a small decline in the electronic components index (112.4) which also reflects this shortage.
There was a slowing in the rise of the forward-looking new export orders index (109.3) and this also indicates that the pace of the economic recovery may be slowing in the near future.
The easing of the pandemic related travel restrictions in air transport in some countries was reflected in a rise in the air freight index. The index could however decrease quite quickly if the restrictions are reinstated due to the spread of COVID-19 variants.
Global goods trade showed a sharp decline during the second quarter of 2020 when the pandemic was still in an early phase, but goods trade has grown steadily since then. The volume of merchandise trade rose by 5.7% year-on-year during the first quarter of 2021. The latest reading of the goods trade barometer indicates that goods trade will be seen to have achieved an even larger year-on-year increase in the second quarter of 2021 when the trade volume data for the period are published.
Downside risks remain for world trade, such as regional disparities, the continuing weakness in trade in services and delays with vaccination programs, particularly among developing countries. Further developments in the pandemic could therefore undermine the economic recovery.
