New WTO trade tool forecasts weak third quarter

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wtoindicator_eTrade growth appears headed for more sluggish action going into the third quarter, according to a new instrument introduced by the World Trade Organization (WTO) that focuses on giving short-term forecasts for global commerce.

The World Trade Outlook Indicator (WTOI), unveiled July 8, is designed to provide “real time” information on the trajectory of world trade relative to recent trends, said the financial institution.

“With a current reading of 99.0, the WTOI is slightly below trend, signalling continued sluggish trade growth in July and August,” it said.

“Still, the WTOI was more positive than the WTO’s quarterly merchandise trade volume index after a weak result in Q1. This suggests that world merchandise trade may rebound in Q2 but that the underlying weakness will likely persist into Q3.”

Components of the WTOI give a mixed picture. Export orders in leading traders have rebounded above trend and continue to pick up. Meanwhile, international air freight data from IATA and container throughput data from major seaports remain weak but show signs of stabilizing. Automobile sales and production have fallen back to trend after rising sharply earlier in the year. Electronic components trade has dipped sharply and is losing momentum, while trade in agricultural raw materials trade has picked up.

Combining a variety of trade-related indices, the WTOI is designed to give an early signal of the current direction of world trade and where it is likely to go in the near future, explained WTO. In this way the WTOI should signal turning points in world merchandise trade volume. It complements existing tools such as the WTO’s longer-term trade forecasts, and other statistical releases

The WTOI gives a headline figure to show performance against trend. A reading of 100 would indicate trade growth in line with recent trends, a reading greater than 100 would suggest above trend growth, while a reading below 100 indicates below trend growth. The WTOI will be updated on a quarterly basis.

“In serving as a quarterly signal of current and short-term trade conditions, the World Trade Outlook Indicator responds to strong interest from policymakers and the business community for more immediate, real time information on trade and trading conditions,” said WTO director-general Roberto Azevêdo.

“The WTOI should provide an early signal if trade is likely to slow or accelerate in the near future. At present it suggests that trade growth will remain weak into the third quarter of 2016.”