After a strong recovery following the initial impact of the Covid-19 pandemic, global merchandise trade is slowing down as a result of production and supply disruptions in critical sectors that are hindering growth and causing a contraction in import demand, according to the latest barometer from the World Trade Organization (WTO).
The Commodity Trade Barometer is a composite indicator that provides real-time information on the trajectory of commodity trade in relation to recent trends. The latest barometer reading of 99,5 is close to the benchmark of 100 for the index, indicating growth in line with recent trends.
The return to the trend observed in the September barometer follows the record reading of 110,4 in the previous barometer, published in August, which reflected both the strength of the trade recovery and the depth of the pandemic-induced shock last year. Recent supply disruptions, including port closures due to increased import demand in the first half of the year, and the interruption of production of heavily traded goods such as automobiles and semiconductors, contributed to the barometer's decline.
Now, it appears that demand for traded goods is also slowing, as evidenced by the fall in export orders, which has further lowered the barometer. The cooling of import demand could help alleviate port congestion, but it is unlikely that delays will be eliminated while container demand remains at or near record levels.
Loss of momentum
All the indices that make up the barometer fell in the last period, reflecting a large loss of dynamism in world merchandise trade. The sharpest decline occurred in the automotive products index (85,9), which fell below trend, as a shortage of semiconductors hampered vehicle production worldwide.
This shortage was also reflected in the electronic components index (99,6). Container transport rates (100,3) and raw materials (100) also returned to their recent trends. Only the air transport index (106,1) remained firmly above the trend, as carriers seek substitutes for sea freight.
World trade
The latest reading from the barometer coincides with the WTO's revised trade forecasts of October 4, which predict growth in the volume of world merchandise trade of 10,8% in 2021, up from 8% in March, followed by an increase of 4,7% in 2022.
The forecast also showed that quarterly trade growth would slow in the second half of 2021, as the volume of merchandise trade approached its pre-pandemic trend.
The outlook for world trade continues to be overshadowed by significant downside risks, such as regional disparities, the continued weakness of trade in services, and delays in vaccination, especially in poor countries. Covid-19 remains the biggest threat to the trade outlook, as new waves of infection could easily undermine the recovery.
