WTO goods trade barometer signals upturn in world trade, but uncertainty remains

The current value of the WTO Goods Trade Barometer, an early indicator of the trajectory of merchandise trade volume, stands at 103—above both the quarterly trade volume index and the baseline value of 100. “This suggests that merchandise trade has been picking up in the third quarter of 2024. However, the outlook remains uncertain due to shifting monetary policies in advanced economies and weakening export orders,” the WTO stated.

World merchandise trade volume

Following a flat period since the final quarter of 2022, world merchandise trade volume began to rise in the fourth quarter of 2023 and gained momentum in the first quarter of 2024, according to the global trade body.

“Trade in the first quarter of 2024 was up by 1 per cent compared to the previous quarter, and 1.4 per cent year-on-year. Quarter-on-quarter growth over the last two quarters averaged 0.7 per cent, which is equivalent to 2.7 per cent on an annualised basis. This aligns with the WTO’s most recent forecast from April 2024, which predicted a 2.6 per cent increase in world merchandise trade for the year,” the WTO said in its report.

Weak demand in Europe

However, recent trade data in value terms show weaker-than-expected performance in Europe, while other regions have experienced stronger growth, the WTO noted. The International Monetary Fund (IMF) in May had stated that Europe’s recovery, driven by domestic demand, is firmly on track, but inflation rates remain elevated in several European countries, necessitating a careful and measured approach to monetary policy easing.

All of the barometer’s component indices are currently on or above trend, with the exception of the electronic components index, which stands at 95.4—below trend and declining. The WTO, in an earlier report, stated that the electronic components index is declining due to global shortages. While demand for household consumer electronics surged after COVID-19, supply has remained a challenge due to ongoing supply chain disruptions.

Goods trade barometer compared with world merchandise trade volume

The indices for automotive products (103.3), container shipping (104.3), and air freight (107.1) are all firmly above trend, although momentum in automotive products has slowed recently, according to the WTO. Container shipping and air freight have witnessed a sharp surge in demand due to the Red Sea crisis, which has forced ships to take longer sea routes, and traders shifting to air routes for the delivery of critical items.

“New export orders, typically the barometer’s most predictive component, are marginally positive at 101.2, but have turned downwards, which could be a cause for concern moving forward. The index for raw materials, at 99.3, is nearly on trend but has declined sharply over the last three months,” the WTO’s Goods Trade Barometer report stated.