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WTO Reports Trend Reversal as Trade Volume Sinks

Trade growth is likely to slow in the closing months of 2022 and into 2023, according to the latest World Trade Organization (WTO) Goods Trade Barometer released Monday, as the global economy continues to be buffeted by strong headwinds.

The current reading of 96.2 is below the baseline value for the index and the previous reading of 100, reflecting cooling demand for traded goods. The Goods Trade Barometer is a composite leading indicator for world trade, providing real-time information on the trajectory of merchandise trade relative to recent trends. Values greater than 100 signal above-trend expansion while values less than 100 indicate below-trend growth.

The WTO said the recent divergence between the Trade Goods Barometer Index and the Merchandise Trade Volume Index, which shows actual trade developments through the second quarter, could be explained by delayed shipments of goods stemming from supply chain disruptions since the pandemic. The Merchandise Trade Volume Index should eventually follow the Barometer Index down once quarterly trade statistics for the second half of 2022 are available, the WTO noted.

The downturn in the goods barometer is consistent with the WTO’s trade forecast of Oct. 5 that predicted merchandise trade volume growth of 3.5 percent in 2022 and 1 percent in 2023 due to several related shocks, including the war in Ukraine, high energy prices and monetary tightening in major economies. Merchandise trade posted a 4.7 percent year‐on‐year increase in the second quarter, after growing 4.8 percent in the first quarter, according to the WTO. For the forecast to be realized, trade growth would have to average around 2.4 percent year-on-year in the second half of this year.

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The barometer index was weighed down by negative readings in sub-indices representing export orders, air freight and electronic components. A report on global air cargo for September from the International Air Transport Association (IATA) showed demand descending to levels on par with pre-pandemic activity. Global demand fell 10.6 percent compared to September 2021, IATA said.

“While air cargo’s activity continues to track near to 2019 levels, volumes remain below 2021’s exceptional performance as the industry faces some headwinds,” said Willie Walsh, IATA’s director general. “At the consumer level, with travel restrictions lifting post-pandemic, people are likely to spend more on vacation travel and less on e-commerce. And at the macro-level, increasing recession warnings are likely to have a negative impact on the global flows of goods and services, balanced slightly by a stabilization of oil prices.”

In the Goods Trade Barometer report, the WTO said the readings “suggest cooling business sentiment and weaker global import demand.”

The pace of U.S. apparel imports continued to decline in September, according to the latest data from the Commerce Department’s Office of Textiles & Apparel (OTEXA). Imports of apparel from the world increased 16.89 percent year to date in September to 25.24 billion square meter equivalents (SME), down from a 20.58 percent gain in the first eight months of the year compared to the same period in 2021 and a 24 percent increase in the first half of the year.

The WTO’s container shipping and raw materials indices finished slightly below trend, but have lost momentum. The main exception was the automotive products index, which rose above trend due to stronger vehicle sales in the United States and increased exports from Japan as supply conditions improved and as the yen continued to depreciate against global currencies.