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WTO Goods Barometer Hits Record High as Trade Recovery Rolls

Global merchandise trade is continuing its robust recovery from the shock of the Covid-19 pandemic, according to the World Trade Organization (WTO) Goods Trade Barometer, which hit a record high in its latest reading issued Wednesday.

The Goods Trade Barometer, which is normalized to be equal to 100, 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 110.4 is the highest on record since the indicator was first released in July 2016 and up more than 20 points year-on-year, the WTO said.

The rise in the barometer reflects both the strength of current trade expansion and the depth of the pandemic-induced shock in 2020. It is notable that, while still well above trend, the index has started to rise at a decreasing rate, which could signal that upward momentum in trade is peaking.

All of the barometer’s component indices were above trend in the latest month, illustrating the broad-based nature of the recovery. Indices for air freight, container shipping and raw materials, in particular, continued to rise, signaling faster than average trade growth, the report noted.

The automotive products index also rose, even as car production and sales fell in July in some countries due to a shortage of semiconductors. This shortage is also reflected in a small decline in the electronic components index.

“The new export orders index has slowed more definitively, providing a further indication that the pace of recovery is likely to decelerate in the near term,” the WTO said.

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The rise in the air freight index reflects a rebound in air transport due to easing pandemic-related travel restrictions in mainly developed countries, the report stated, adding that the index could turn down again suddenly if the spread of Covid-19 variants forces the re-imposition of restrictions.

The latest barometer reading is broadly consistent with the WTO’s most recent trade forecast of March 31, which foresaw an 8 percent increase in the volume of world merchandise trade in 2021 following a 5.3 percent decline in 2020.

The WTO said global goods trade has grown steadily since it registered a sharp decline in the second quarter of 2020 during the early days of the pandemic. The volume of merchandise trade was up 5.7 percent year-on-year in the first quarter of 2021, the largest jump since a 5.8 percent rise in third quarter of 2011. The latest barometer reading suggests that goods trade will see an even larger year-on-year increase in the second quarter once trade volume data for that period is available.

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