Global trade will continue to grow in the third quarter, WTO says

Surging exports of automotive products boost trading volumes in the second quarter

Shipping containers and gantry cranes dockside at the Port of Barcelona in Barcelona, Spain. The WTO anticipates growth in world trade. Bloomberg
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Global trade volumes will grow at a “moderate pace” in the third quarter of the year after rebounding in the second on surging automotive exports following two quarters of decline, according to the World Trade Organisation (WTO).

The WTO’s periodic goods barometer jumped to 99.1 in June from 95.6 in May, the Geneva-based organisation said in a report published on Thursday.

The goods trade barometer is a composite leading indicator for world trade, providing real-time information on the trajectory of merchandise trade relative to recent trends.

Barometer values greater than 100 are associated with above-trend trade volumes while values less than 100 suggest that goods trade has either fallen below trend or will do so in the near future.

The volume of merchandise trade was down 1 per cent year-on-year and 0.3 per cent quarter-on-quarter in the first quarter of 2023, “extending a downturn that began in the fourth quarter of 2022,” the report said.

High food and energy prices linked to the war in Ukraine, and tighter monetary policies aimed at fighting inflation in advanced economies contributed to the slump in global trade during the period.

“Global import demand remains weak, weighed down by sluggish economic growth in leading economies including the European Union and China,” the report said.

The euro area, which was greatly affected by the Ukraine war, soaring energy prices and record inflation last year, is set to cool as the European Central Bank continues to raise interest rates to restore price stability.

Growth in the bloc, which includes 20 countries that use the euro as their primary currency, is forecast at 0.9 per cent in 2023, following a 3.5 per cent expansion in 2022.

Most of the barometer's component indices were slightly below trend in their latest readings, including the export orders index (97.6), the container shipping index (99.5), the air freight index (97.5), and the raw materials index (99.2).

The main exceptions were the automotive products index (110.8), which has climbed firmly above the trend and the electronic components index (91.5), which has fallen below the trend.

“Surging exports of automotive products have contributed to stronger-than-expected GDP growth in Japan in the first half of 2023,” the report said.

Japan’s economy has expanded much faster than forecast, as a surge in exports more than offset weaker-than-expected results for both business investment and private consumption.

Its gross domestic product grew at an annualised pace of six per cent in the second quarter, marking the strongest growth since the last quarter of 2020, Bloomberg reported earlier this month citing Cabinet Office data.

“Vehicle exports have also been a rare source of strength for the Chinese economy, which has struggled to gain momentum in recent months,” the report said.

Chinese economy is forecast to grow at 5.2 per cent in 2023, following a 3 per cent expansion in 2022, according to the International Monetary Fund.

WTO in April projected 1.7 per cent growth in merchandise trade in 2023 and the target “is still attainable if trade growth picks up in the second half of the year as expected,” it said.

Updated: August 26, 2023, 8:16 AM