World trade slows to nine-year low

27 February 2019

The World Trade Outlook Indicator (WTOI) has hit its lowest point since March 2010.

Published by the World Trade Organization (WTO), the Indicator is, in part, designed to identify turning points and gauge momentum in global trade growth.

Issued in mid-February, the latest version points to trade weakness being likely to extend into the first quarter (Q1) of 2019 due, the WTO suggests, to the simultaneous decline of several trade-related indicators.

The WTOI complements trade statistics and forecasts produced by the WTO and other organisations. Readings of 100 indicate growth in line with medium-term trends, while readings greater than 100 suggest above-trend growth and those below 100 indicate below-trend growth.

The latest reading of 96.3 is the weakest recorded by the WTOI since March 2010 and was driven by what the WTO describes as “steep declines” in the component indices.

These appear to be succumbing to pressure from heightened trade tensions, with export orders (95.3), international air freight (96.8), automobile production and sales (92.5), electronic components (88.7) and agricultural raw materials (94.3) all down significantly.

In some cases, the scores were close to those recorded at the time of the financial crisis.

The WTO acknowledges that some of the indices might have been hit by temporary factors, such as the front-loading of imports ahead of anticipated US-China tariffs and technical problems in the German automotive sector.

Nevertheless, policymakers should be prepared for a sharper slowdown if current trade tensions remain unresolved, the WTO notes.

Currently, trade growth is predicted to slow to 3.7% this year from an anticipated 3.9% last year. Those estimates could, however, be revised downward, the WTO warns, if trade conditions continue to deteriorate.

The latest two-page World Trade Outlook Indicator can be found here.