Temporary downturn awaits global trade
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The value of the WTO barometer, an index that is a leading indicator of the state of world trade, fell to 92.2 points in December 2022 (a reading below 100 points indicates a decrease in turnover). As follows from the WTO data released yesterday, the December value of the “barometer” is significantly below the line of the merchandise trade volume index, which indicates a decrease in turnover in the fourth quarter of 2022 and the first quarter of 2023.
In the third quarter of last year, the volume of world trade showed an increase of 5.6% compared to the same period in 2021. Overall growth for the three quarters was 4.4% (including 3.5% in the second quarter and 4.2% in the first), exceeding the WTO forecast of 3.5% for the entire year. Now, given the expected drawdown in the fourth quarter, the final estimate of the year is likely to bring the actual data closer to the forecast.
In December, a decline was noted in all components of the “barometer”, except for the auto industry index (its value was 105.8 points due to growth in sales and production of cars in the US, Europe and Japan, which compensated for the “drawdown” in China). The export orders index (97.4 points) remained below the trend, but showed growth. Indices of sea container transportation (89.3 points), air freight (87.8 points), sales of electronic components (84.9 points) and agricultural raw materials (92 points) not only remained below the trend, but also decreased compared to November.
The decline in world trade, however, may not last long – Chinese ports are already seeing an increase in container traffic, the WTO points out. Recall that in December, the Chinese authorities softened the regime of coronavirus restrictions, abandoning large-scale lockdowns, and from January 8, restrictions on entry into the country were lifted both in terms of arrival at the country’s international airports and border crossings at land and sea checkpoints.
The Caixin Purchasing Managers Index (PMI) data released yesterday indicated an expansion in business activity in China’s manufacturing sector – its value in February was 51.6 points against 49.2 points in January (a value above 50 points indicates an increase in business activity) . The growth of business activity in China will lead to an increase in demand for commodities, including oil and metals, in the first half of this year, Capital Economics expects.
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