Trade indicator points to continued modest recovery of world trade in third quarter

The WTO’s latest World Trade Outlook Indicator (WTOI) suggests that global merchandise trade growth will continue to strengthen in the third quarter of 2017. The latest reading of 102.6 is higher than the previous reading of 102.2 issued in May this year, suggesting sustained momentum for trade growth. Strong performances in air freight, export orders and container shipping are balanced by weaker results in other indices.

World Trade Outlook IndicatorThe WTOI is designed to provide “real time” information on the trajectory of world trade relative to recent trends. Combining several trade-related indices into a single composite indicator, the WTOI measures short run performance against medium-term trends.

The latest reading of 102.6 is the highest level of the indicator since April 2011, suggesting that trade volume growth will continue to be above trend in the third quarter of 2017. Strong growth in export orders, air freight and container shipping is leading the upward trend in the indicator as economic activity picks up around the world. Results for agricultural raw materials and electronic components trade have been weaker, but both indices have turned up recently.

Meanwhile, weak growth in automobile production and sales is a cause for concern as it may signal weakening consumer confidence. Global export orders also show signs of plateauing, which could mean that upward momentum in trade growth may have peaked.  If this is the case, trade growth would be expected to moderate later this year.

These results are slightly stronger than the WTO’s most recent trade forecast of 12 April 2017, which anticipated moderate trade growth this year after weak expansion last year. The WTOI is not intended as a short-term forecast, although it does provide an indication of trade growth in the near future. Its main contribution is to identify turning points and gauge momentum in global trade growth. As such, it complements trade statistics and forecasts from the WTO and other organizations. Readings of 100 indicate growth in line with medium-term trends; readings greater than 100 suggest above trend growth, while those below 100 indicate the reverse. The direction of change reflects momentum compared with the previous month.

The full World Trade Outlook Indicator is available here.

Further details on the methodology are contained in the technical note here.

Source: WTO