Goods barometer rises above trend, signals upturn in trade volume

Global goods trade continued to recover in the third quarter of 2024 after demand for traded goods stalled in 2023 amid high inflation and rising interest rates.

This is according to the latest World Trade Organisation (WTO) Goods Trade Barometer. Despite the positive signal from the barometer index, the outlook for trade remains highly uncertain due to rising geopolitical tensions, ongoing regional conflicts, shifting monetary policy in advanced economies and weakening export orders.

The Goods Trade Barometer is a composite leading indicator for world trade, providing information on the trajectory of merchandise trade relative to recent trends. Barometer values greater than 100 are associated with above-trend trade volumes, while barometer values less than 100 suggested that goods trade has either fallen below trend or will do so soon.

The latest reading of 103.0 is above both the quarterly trade volume index and the baseline value of 100 for both indices, suggesting that merchandise trade volume growth should remain positive in Q2 and Q3 of 2024.

After remaining flat since Q4 of 2022, the volume of world merchandise trade started to turn up in Q4 of 2023 and gained momentum in Q1 of 2024, with trade going up 1.0 per cent on a quarter-on-quarter basis and 1.4 per cent on a year-on-year basis.

Quarter-on-quarter growth in the last two quarters averaged 0.7 per cent, which is equivalent to 2.7 per cent on a yearly basis. According to the global trade body, recent data in value terms showed weaker than expected trade growth in Europe and stronger than expected growth in other regions.

All of the barometer’s component indices are currently on or above trend, with the exception of the electronic components index (95.4), which is below trend and falling. Component indices for automotive products (103.3), container shipping (104.3) and air freight (107.1) are all firmly above trend, although the automotive products index appeared to have lost momentum recently.

New export orders (101.2), usually the barometer’s most predictive component is marginally positive but has turned down while index of raw materials (99.3) has declined sharply over the last three months.