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Global trade hits record high

Author: ICAEW Insights

Published: 20 Aug 2021

The World Trade Organisation (WTO) index suggests a huge rebound for trade after its decline in 2020.

Global trade has bounced back to record levels after its sharp decline during the worst of the pandemic, according to new figures from the WTO. The WTO’s Goods Trade Barometer sits at 110.4, which is the highest level since the indicator launched in 2016. It’s an increase of over 20 points year-on-year.

Air freight, container shipping and raw materials performed particularly well, scoring 114.0, 110.8 and 104.7 respectively. This hints at faster than average trade growth in each of these areas.

While car production and sales fell in July in some regions due to a semiconductor shortage, the automotive products index also rose. Electronic components declined slightly, reflecting that shortage.

“It is reassuring and welcome that global trade figures have bounced back so strongly after the deep contraction due to COVID,” says Iain Wright, ICAEW’s Managing Director, Reputation and Influence. “The long term trend of global economic activity has expanding international trade at its heart, propelling economic growth across the world, raising living standards, lifting people and nations out of poverty and providing ever greater opportunities for the UK and our companies to sell our great goods and services around the world.”

As part of building back better, export opportunities have to be a key component of our future economic growth, but SMEs in particular are often nervous of entering overseas markets, Wright explains. “Chartered accountants are at the heart of that opportunity and can help overcome that fear, providing advice and acting as intermediaries to ensure that potential exporters have the support they need to navigate the complex global trading environment.”

Forward-looking new export orders have slowed, however, suggesting that this record rise will not last. It is more reflective of a rebound after the easing of pandemic-related restrictions. It is likely that the increase will either level off or decrease again if new variants force restrictions to return.

“The world’s economy is more interconnected than ever before – the rapid spread of Coronavirus in early 2020 and the deep and devastating impact the subsequent lockdown had on trade and economy is evidence of that,” says Wright. “Factors such as differing vaccination rates for nations, and problems with availability of raw materials have a direct impact upon the UK’s production capability and export potential, slowing down domestic growth and hindering key sectors such as automotive and manufacturing in general.”

The current upward trajectory continues a trend identified by the WTO in its trade forecast in March, which predicted an 8% increase in the volume of world trade in 2021 after it fell by 5.3% in 2020.

The volume of merchandise trade was up 5.7% year-on-year in the first quarter of 2021 – the largest jump since a 5.8% rise in Q3 2011. The Goods Trade Barometer suggests that Q2 will see a larger increase.

The WTO calculates its Goods Trade Barometer using several component indices of trade-related data, combined into a single index. These include an export orders index based on business surveys in leading economies compiled in purchasing managers’ indices; data sourced from the International Air Transport Association; a shipping index of container port throughput at major international seaports; and automotive sales and production data from leading economies, among others.

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