The World Trade Organization’s latest World Trade Outlook Indicator (WTOI) suggests global merchandise trade growth will likely moderate in the fourth quarter.
The reading of 102.2 signals continued trade expansion in volume, but a slower pace of growth than earlier in the year, when trade recorded strong increases. Readings of 100 indicate growth in line with medium-term trends, while readings greater than 100 suggest above trend growth and those below 100 indicate the reverse. The direction of change reflects momentum compared with the previous month.
The latest reading of the WTOI is slightly lower than that issued in August–a value of 102.6–which pointed to a continuing recovery of trade in the second and third quarters. This was confirmed by actual trade developments, as trade growth remained strong in the second quarter. In the third quarter, a comparable index of world merchandise trade volumes appears to be in line with the indicator, signaling stable trade growth for the period.
[Read more about WTO outlook: WTO Upgrades Trade Outlook, but Warns of Risks Ahead]
The export orders component of the WTOI remains above trend, but has turned downward recently. This indicates that trade growth will moderate but remain fairly strong in the coming months. Indices for international air freight and container port throughput are also above trend, but have lost upward momentum, pointing to decelerating trade growth.
Automobile production and sales are below trend but show signs of having bottomed out, which could indicate strengthening consumer confidence. Indices for electronic components and agricultural raw materials are both rising, although the level of agriculture raw materials trade remains below its medium-run trend.
These results are broadly consistent with the upgraded forecast for world merchandise trade growth the WTO issued on Sept. 21, which predicted 2017 trade expansion at 3.6%, following stronger than expected trade growth in the first half of the year.
The WTOI is not intended as a short-term forecast, although it does provide an indication of trade growth in the near term. Its main contribution is to identify turning points and gauge momentum in global trade growth, serving as a complement to trade statistics and forecasts from the WTO and other organizations.