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WTO Goods Trade Barometer Indicates Supply Chain Disruptions Cramping Growth

Following its sharp rebound from the initial shock of the Covid-19 pandemic, global merchandise trade is slowing, with production and supply disruptions in critical sectors dampening growth alongside cooling import demand, the latest World Trade Organization (WTO) Goods Trade Barometer issued Monday indicated.

The Goods Trade Barometer is a composite leading indicator providing real-time information on the trajectory of merchandise trade relative to recent trends ahead of conventional trade volume statistics. The latest barometer reading of 99.5 is close to the baseline value of 100 for the index, indicating growth in line with recent trends.

The return to trend follows the record reading of 110.4 in the previous barometer issued in August that reflected the strength of the trade recovery and the depth of the pandemic-induced shock last year, the WTO noted. Recent supply shocks, including port gridlock that resulted from surging import demand in the first half of the year and disrupted production of widely traded goods such as automobiles and semiconductors, have contributed to the barometer’s decline.

It now appears that demand for traded goods is also easing, the WTO said, illustrated by falling export orders that further weighed down the barometer.

“Cooling import demand could help ease port congestion, but backlogs and delays are unlikely to be eliminated as long as container throughput remains at or near record levels,” the Goods Trade Barometer report stated.

All of the barometer’s component indices were declining in the latest period, reflecting a broad loss of momentum in global goods trade. The steepest decline was seen in the automotive products index (85.9), which dropped below trend as a shortage of semiconductors hampered vehicle production worldwide.

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Indices for container shipping (100.3) and raw materials (100.0) also returned to near their recent trends. Only the air freight index (106.1) remained firmly above trend as shippers sought substitutes for ocean transport, the WTO noted.

The latest barometer reading is broadly consistent with the WTO’s revised trade forecast on Oct. 4, which foresaw global merchandise trade volume growth of 10.8 percent in 2021, up from 8 percent forecast in March, followed by a 4.7 percent rise in 2022. The forecast also showed quarterly trade growth slowing in the second half of 2021 as the volume of merchandise trade volume approached its pre-pandemic trend, the Goods Trade Barometer said.

“The outlook for world trade continues to be overshadowed by considerable downside risks, including regional disparities, continued weakness in services trade and lagging vaccination rates, particularly in poor countries,” the WTO added. “Covid-19 continues to pose the greatest threat to the outlook for trade, as new waves of infection could easily undermine the recovery.”