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Strong demand for auto, electronic parts driving trade recovery, WTO says

Soaring demand for electric vehicles may be powering pickup in sales of automotive and electronic parts, Goods Trade Barometer shows

Strong demand for auto, electronic parts driving trade recovery, WTO says
[Source photo: Chetan Jha/Press Insider]

Merchandise trade has scripted a comeback, led by automobiles and electronic parts, but subdued economic growth and widening geopolitical tensions may derail the recovery, the World Trade Organization (WTO) said in a report.

The current reading of 100.7 is above the previous reading of 99.1 from August and close to the baseline value of 100, the WTO’s latest quarterly Goods Trade Barometer showed.

The Goods Trade Barometer is a composite leading indicator for world trade, providing real-time information on the trajectory of merchandise trade relative to recent trends.

Barometer values greater than 100 are associated with above-trend trade volumes while barometer values below 100 suggest that goods trade has either fallen below trend or will do so over the short-term.

The barometer’s component indices are mixed, with some rising firmly above trend and others remaining on or below trend. The biggest gains were seen in the indices for automobile sales and production (110.0) and electronic components trade (109.8).

The indices for air freight (100.3), export orders (99.4) and container shipping (98.0) finished on or slightly below trend, while the raw materials index (95.6) sank below trend.

The strength of the automotive products and electronic components indices may be explained by surging global demand for electric vehicles, the report said, adding that the weak result for raw materials may be partly due to weakening property markets as interest rates remain elevated.

World merchandise trade volume was flat in the second quarter of 2023, up 0.2% compared to the previous quarter but still down 0.5% year-on-year.

Trade statistics for the third quarter should come in slightly stronger, thanks to accelerating growth in the US and China, even as a stagnant European Union continued to weigh on global demand, the report said.

Year-on-year trade growth is likely to be strong in the last quarter of the calendar year in any case due to the reduced amount of trade in the same period last year as high energy prices, rising interest rates and pandemic-related disruptions weighed on economic growth in leading economies, the report said.

These developments are consistent with the WTO’s forecast of 5 October that foresaw a 0.8% increase in global trade volume in 2023. While the forecast remains unchanged, risks to the trade outlook have shifted towards the downside in light of recent developments in the Middle East, it added.

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