You will be redirected back to your article in seconds

Trade Momentum to Slow Down in Third Quarter, Suggests WTO Indicator

Hindered by global tensions, trade expansion is on track to slow further in the third quarter, according to the World Trade Organization’s latest World Trade Outlook Indicator.

The current WTOI reading of 100.3 is below the previous value of 101.8 and just above the baseline value of 100 for the index, signaling an easing of trade growth in the coming months in line with medium-term trends, the WTO said.

“The loss of momentum reflects weakness in component indices, including export orders and automobile production and sales that could be a result of the ratcheting-up of trade tensions,” the report noted. The latest results are generally in line with the WTO’s most recent trade forecast, issued in April, that predicted a slowing of merchandise trade volume growth to 4.4% this year, from 4.7% in 2017.

“Rising trade tensions continue to pose risks to the trade forecast and will be monitored closely,” the report said.

The moderation in the overall WTOI index was driven by export orders — which have been on a steady decline this year — plus automobile production and sales that have risen slightly recently but remained below trend. Electronic components stayed above trend, while agricultural raw materials moved from below to on-trend.

The merchandise trade volume index was flat. The indices for air freight and container port throughput remained above trend, but growth in both areas “appears to be past its peak,” the WTOI noted.

The latest data from the International Air Transport Association for global air freight markets showed that demand, measured in freight ton kilometers, rose 2.7% in June, compared with the a year earlier. This continued the slowdown in air cargo growth that began earlier in 2018, IATA said. Growth for the first half of 2018 stood at 4.7%, less than half the growth rate in 2017.

“Air cargo continues to be a difficult business, with downside risks mounting,” said Alexandre de Juniac, IATA’s director general and CEO. “We still expect about 4 percent growth over the course of the year, but the deterioration in world trade is a real concern. While air cargo is somewhat insulated from the current round of rising tariff barriers, an escalation of trade tension resulting in a reshoring of production and consolidation of global supply chains would change the outlook significantly for the worse.”

On the ocean, Drewry’s latest assessment, for May, showed the global container port throughput index increased more than five points compared with April and reached 130.6 points. On an annual comparison, the index was almost five points higher than the May 2017 level of 126.1 points and was the highest since the inception of Drewry Container Port Throughput Index in January 2012.

All regions witnessed monthly and annual increases except Latin America. The China and North America throughput indices reached an all-time high level of 140 and 139 points in May 2018, which were up 8.1% and 3.8%, respectively compared with April. However, the annual increase was slightly lower at 2.8% for China and 4.6% for North America.

Editor’s Note: This story was reported by FN’s sister magazine Sourcing Journal. For more, visit Sourcingjournal.com.

Want more?

Moody’s Report: $500B in Tariffs on Chinese Imports Would Be a ‘Credit Negative’ for US Footwear Firms

More From Our Brands

Access exclusive content