World merchandise trade likely registered a historic fall in the second quarter, according to the latest reading of the World Trade Organization’s (WTO) Goods Trade Barometer, a real-time gauge of trends in global trade.
The WTO said additional indicators point to partial upticks in world trade and output in the third quarter, but the strength of any such recovery remains highly uncertain, with an L-shaped, rather than V-shaped, trajectory unable to be ruled out.
The current barometer reading as of Aug. 19 of 84.5 is 15.5 points below the baseline value of 100 for the index and 18.6 points down from the same period last year. This reading–the lowest on record in data going back to 2007, and on par with the nadir of the 2008-09 financial crisis–is broadly consistent with WTO statistics issued in June that estimated an 18.5 percent decline in merchandise trade in the second quarter compared to the same period last year.
The WTO report had the barometer’s component indices well below trend, with many registering historic lows, although some have begun to stabilize. Indices for automotive products (71.8) and air freight (76.5) were the worst on record since 2007. Container shipping (86.9) also remains deeply depressed.
Export orders (88.4) show signs of recovery, as this index has turned upward. Indices for electronic components (92.8) and agricultural raw materials (92.5) have held up relatively well, showing only modest declines.
The WTO’s June statistics indicated a 14 percent drop in global merchandise trade volume between the first and second quarters.
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“This estimate, together with the new Goods Trade Barometer reading, suggest that world trade in 2020 is evolving in line with the less pessimistic of the two scenarios outlined in the WTO’s April forecast, which projected that the volume of merchandise trade this year would contract by 13 percent compared to 2019,” the report said. “However, as WTO economists warned in June, the heavy economic toll of the COVID-19 pandemic suggests that the projections for a strong, V-shaped trade rebound in 2021 may prove overly optimistic.”
The Goods Trade Barometer is designed to gauge momentum and identify turning points in world trade growth. Readings of 100 indicate growth in line with medium-term trends; readings greater than 100 suggest above-trend growth, while those below 100 indicate below-trend growth.
In normal times, the Goods Trade Barometer anticipates changes in the trajectory of world trade by a few months. However, the WTO noted that the sudden, unexpected nature of the Covid-19 crisis may have profoundly altered economic behavior and patterns, reducing the predictive value of the standard set of indicators.
In this fast-changing environment, high-frequency statistics, made possible by advances in data processing and collection, may provide analysts with early signals of recovery in economic activity and trade, the report said. Other statistics may capture shifts in consumer and business sentiment.
“Modest increases have already been recorded for several of these indicators related to trade, such as those tracking commercial flights and port calls by container ships,” the WTO said.