WTO Signals Concern Ahead With Global Trade

(GENEVA, SWITZERLAND) Trade weakness is likely to extend into the first quarter of 2019, according to the World Trade Organization’s (WTO) latest World Trade Outlook Indicator (WTOI). The simultaneous decline of several trade-related indicators is expected to put policymakers on guard for a sharper slowdown should the current trade tensions remain unresolved. The most recent reading of 96.3 is the weakest since March 2010 and below the baseline value of 100 for the index. According to researchers, this signals below-trend trade expansion into the first quarter. Weakness in the overall index was driven by steep declines in the component indices, which appear to be under pressure from heightened trade tensions. Indices for export orders (95.3), international air freight (96.8), automobile production and sales (92.5), electronic components (88.7) and agricultural raw materials (94.3) have shown the strongest deviations from trend, approaching or surpassing previous lows since the financial crisis. Only the index for container port throughput remained relatively buoyant (100.3), showing on-trend growth. Temporary factors may have influenced some of the indices. Front-loading of imports ahead of anticipated US-China tariffs may have sustained container shipping to some extent, while technical problems in the German automotive sector may have contributed to weakness in automobile production and sales. Trade growth is currently forecast to slow to 3.7% in 2019 from an expected 3.9% in 2018, but these estimates could be revised downward if trade conditions continue to deteriorate. Designed to provide “real time” information on the trajectory of world trade relative to recent trends, the WTOI is not intended as a short-term forecast, although it does provide an indication of trade growth in the near future. It aims to identify turning points and gauge momentum in global trade growth. Readings of 100 indicate growth in line with medium-term trends; readings greater than 100 suggest above-trend growth, while those below 100 indicate below trend growth.