Global Growth Could be on the Brink of Stalling

Global Growth Could be on the Brink of Stalling

Trade expansion will likely slow further in the third quarter of 2018, the World Trade Organization’s (WTO) latest World Trade Outlook Indicator (WTOI) indicated on Thursday.

The most recent 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, said the WTO in a statement.

“This loss of momentum reflects weakness in component indices including export orders and automobile production and sales, which may be responding to the ratcheting up of trade tensions,” said the WTO in the release.

“Rising trade tensions continue to pose risks to the trade forecast and will be monitored closely going forward,” warned the WTO.

The moderation in the overall WTOI index was driven by export orders (97.2), which have declined steadily over the course of the year, and automobile production and sales (98.1), which have risen slightly recently but remain below trend.

The indices for air freight (100.9) and container port throughput (102.2) remain above trend but growth momentum in both appears to be past its peak.

Electronic components stayed above trend (102.2) while agricultural raw materials (100.1) moved from below trend to on trend.

Designed to provide “real time” information on the trajectory of world trade relative to recent trends, the WTOI provides an indication of trade growth in the near future, complementing 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 the reverse.

The latest results remain broadly in line with the WTO’s most recent trade forecast issued on 12 April 2018, which predicted a slowing of merchandise trade volume growth from 4.7% in 2017 to 4.4% in 2018. Rising trade tensions continue to pose risks to the trade forecast and will be monitored closely going forward.

The moderation in the overall WTOI index was driven by export orders (97.2), which have declined steadily over the course of the year, and automobile production and sales (98.1), which have risen slightly recently but remain below trend. The indices for air freight (100.9) and container port throughput (102.2) remain above trend but growth momentum in both appears to be past its peak. Electronic components stayed above trend (102.2) while agricultural raw materials (100.1) moved from below trend to on trend.

Designed to provide “real time” information on the trajectory of world trade relative to recent trends, the WTOI is not intended as a short-term forecast, although it does provide an indication of trade growth in the near future. Its main contribution is to identify turning points and gauge momentum 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 the reverse. The direction of change reflects momentum compared with the previous month.

The full World Trade Outlook Indicator is available here.

Further details on the methodology are contained in the technical note here.

The following two tabs change content below.
Shayne Heffernan Funds Manager at HEFFX holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.

You must be logged in to post comments :  
CONNECT WITH