WTO’s quarterly indicator suggests trade growth slowing further in Q4

GENEVA (REUTERS): Global growth in merchandise trade is likely to slow further this quarter, the World Trade Organization (WTO) said on Monday, as it published a quarterly indicator showing declines in all seven of the drivers of trade that it tracks. 

The WTO’s quarterly trade outlook indicator showed a reading of 98.6, the lowest since October 2016, reflecting a further loss of momentum since August, when the index was at 100.3. A reading below 100 signals below-trend growth in trade. 

The indicator is based on seven drivers - merchandise trade volume in the previous quarter, export orders, international air freight, container port throughput, car production and sales, electronic components and agricultural raw materials. 

In the latest reading, electronic components plunged to 93.3 from 102.2 in the previous quarter, while agricultural raw materials slumped to 97.2 from 100.1 and export orders slid to 96.6 from 97.2 in August. 

World trade growth has struggled to outpace economic growth since the global financial crisis of 2008, ending a long streak in which trade increased at roughly double the rate of global GDP. 

Trade appeared to be reviving last year when it grew by 4.7%, prompting cheery forecasts in April of a further 4.4% rise this year and 4.0% in 2019. 

However, the WTO cut those forecasts in September, following the opening salvoes of a trade war triggered by US tariffs on steel and aluminium and on goods from China. 

The WTO’s new forecasts of 3.9% growth this year and 3.7% in 2019 may still prove optimistic. 

“Risks to the forecast are considerable and firmly weighted to the downside. A further ratcheting up of trade tensions could have direct negative effects on trade, but also beyond,” the WTO said in a report on G20 trade barriers last week. 

“A build-up of economic and financial risks could undermine trade and output and developing and emerging economies could experience capital outflows and financial contagion as developed countries raise interest rates.” 

Other potential risks included geopolitical tensions and - in the medium-to-long term - ageing populations in developed countries and economic rebalancing in China.