The latest quarterly WTO Goods Trade Barometer, released on November 27, indicates a rebound in the volume of global merchandise trade following a recent decline. Key drivers of this recovery include increased automobile sales and production, as well as the trade in electronic components. However, while trade volumes are on the mend, mixed economic data and escalating geopolitical tensions cloud the near-term outlook. The current barometer index stands at 100.7, surpassing the previous reading of 99.1 from August and nearing the baseline value of 100. This suggests that merchandise trade volume is gradually returning to its medium-term trend in the latter half of 2023, though uncertainty persists due to economic fluctuations and geopolitical challenges.
The Goods Trade Barometer serves as a composite leading indicator for global trade, offering real-time insights into merchandise trade trends. A value above 100 indicates trade volumes exceeding the trend, while a value below 100 suggests that trade has fallen below or is expected to fall below the trend.
World merchandise trade volume remained relatively stable in the second quarter of 2023, with a modest 0.2% increase compared to the previous quarter but still down by 0.5% year-on-year. The third-quarter trade statistics are expected to show slight improvement, driven by accelerated GDP growth in the United States and China, despite a sluggish European Union economy continuing to dampen global demand.
Year-on-year trade growth is anticipated to be robust in the fourth quarter, primarily due to reduced trade volumes during the same period the previous year, influenced by factors like high energy prices, rising interest rates, and pandemic-related disruptions in major economies. The WTO's October 2023 forecast, which projected a 0.8% increase in global trade volume for 2023, remains unchanged. However, recent developments in the Middle East have introduced downside risks to the trade outlook.
The barometer's component indices display a mixed picture, with some exceeding trend levels while others lag behind. Notable gains were observed in the indices for automobile sales and production (110.0) and electronic components trade (109.8). Meanwhile, the indices for air freight (100.3), export orders (99.4), and container shipping (98.0) remained on or slightly below trend, and the raw materials index (95.6) dipped below trend.
The strength of the automotive and electronic components indices can be attributed to surging global demand for electric vehicles. Conversely, the weaker performance of the raw materials index may be linked to softening property markets amid elevated interest rates.