The World Trade Organization’s latest World Trade Outlook Indicator (WTOI) released Monday suggests that the trade recovery of 2017 should continue, with solid volume growth in the first quarter.
The Outlook Indicator’s current value of 102.3 is little changed from the 102.2 recorded last November, pointing to steady merchandise trade volume growth. Strong results for air freight, container shipping and export orders in particular suggest that, while the trade recovery may moderate in due course, it will likely continue in the coming months and remain above trend, according to the WTO.
Designed to provide “real time” information on the trajectory of world trade relative to recent trends, the WTOI is not intended as a short-term forecast, although it does provide an indication of trade growth in the near future. Its main contribution is to identify turning points and gauge momentum in global trade growth.
As such, it complements trade statistics and forecasts from the WTO and other organizations. 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 reverse. The direction of change reflects momentum compared with the previous month. The WTOI has recorded readings of 102 or higher since February 2017, which coincided with a strengthening of global trade flows.
Component indices of the WTOI are mostly favorable. Container port throughput (104.3) and air freight (103.2) are firmly above trend, indicating strong current shipments of goods. The WTO noted that air freight has proven to be a timely indicator of overall world trade and an early signal of turning points in recessions.
According to the International Air Transport Association (IATA), 2017 global air freight demand grew 9 percent compared to the 3.6% annual growth recorded in 2016.
Freight capacity rose 3 percent in 2017, with demand growth outpacing capacity growth by a factor of three. IATA noted that 2017 demand for air freight grew at twice the pace of the expansion in world trade resulting from strong global demand for manufacturing exports, as companies moved to restock inventories quickly.
“Air cargo had its strongest performance since the rebound from the global financial crisis in 2010,” said Alexandre de Juniac, IATA’s director general and chief executive officer. “Air cargo is still a very tough and competitive business, but the developments in 2017 were the most positive that we have seen in a very long time.”
He said the outlook for air freight in 2018 is optimistic, with growing strength in international e-commerce and the transport of time- and temperature-sensitive goods.
“Challenges remain, including the need for industry-wide evolution to more efficient processes,” de Juniac said. “That will help improve customer satisfaction and capture market share as the expectations of shippers and consumers grow ever more demanding.”
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Meanwhile, the WTOI showed export orders (102.8) reaching their highest level since 2011, pointing to sustained recovery.
Weaker results are observed for automotive products (101.0), agricultural raw materials (100.8) and electronic components (94.1), which could indicate a weakening of consumer sentiment. In the U.S., the benchmark University of Michigan Consumer Sentiment survey for January came in at 95.7, up 0.2 from the December Final reading of 95.9.
“Consumer sentiment has remained largely unchanged for more than a year at very favorable levels. Consumers continued to expect growth in jobs and incomes, but anticipated a slightly higher inflation rate,” chief economist Richard Curtin said.
The Indicator showed that overall, these results are somewhat stronger than the WTO’s most recent trade forecast issued in September, which pointed to merchandise trade volume growth of 3.6% for 2017 and 3.2% in 2018. The next WTO trade forecast update is expected in early April.