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‘Further weakening of trade likely in Q1 2020 as COVID-19 spreads’

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World merchandise trade growth is likely to remain weak in early 2020, according to the latest WTO Goods Trade Barometer.Specifically, the real-time measure of trade trends now reads 95.5 — less than the 96.6 recorded last November and well below the index’s baseline value of 100. This below-trend performance could be reduced further by a new global health threat.

According to the data, every component of the Goods Trade Barometer will be influenced by the economic impact of COVID-19 and the effectiveness of efforts to treat and contain the disease.

The Goods Trade Barometer provides information on the current trajectory of world merchandise trade relative to recent trends, based on best-available forward-looking data. It does not account for recent developments such as the outbreak of COVID-19, the new coronavirus disease, which may dampen trade prospects further.

WTO trade statistics show that the volume of world merchandise trade was down 0.2% in the third quarter of 2019 compared to the previous year. While the year-on-year growth figures for the fourth quarter may pick up slightly, the latest barometer reading provides no indication of a sustained recovery. Indeed, year-on-year trade growth may fall again in the first quarter of 2020, though official statistics to confirm this will only become available in June.

The drop in the barometer since November has been driven by additional declines in indices for container shipping (94.8) and agricultural raw materials (90.9), as well as the plateauing of the automotive products index (100.0).

Although indices for export orders (98.5), air freight (94.6) and electronic components (92.8) are all below baseline, they appear to have stabilized and would normally be expected to rise in the coming months.

Like its counterpart for services, the Goods Trade Barometer aims to gauge momentum and identify turning points 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 below-trend growth.Last year, the WTO projected that world merchandise trade remain below trend into the fourth quarter of 2019.

At the time, the indicator’s reading of 96.6 marked a slight improvement compared to the 95.7 registered in August, but it remains well below the index’s baseline value of 100, signalling below average growth.

In September, WTO economists downgraded their trade growth expectations for 2019 to 1.2%, down from the 2.6% forecast in April. They attributed this substantial deceleration to slowing economic growth, increased tariffs, Brexit-related uncertainty, and the shifting monetary policy stance in developed economies.


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