Global merchandise trade rebounds in Q3 2024, but geopolitical

According to the latest Goods Trade Barometer report from the World Trade Organization (WTO), global merchandise trade continued to recover in the third quarter of 2024. This marks a rebound in global merchandise trade from its sluggish performance in 2023, with trade growth averaging 0.7% quarter-on-quarter over the past two quarters, or 2.7% annualized. This is very consistent with the WTO’s earlier forecast of a 2.6% increase in trade this year.

Also read: WTO Director-General warns of rising protectionism and its threat to global trade

The WTO noted that trade growth starts to pick up in late 2023 and gains momentum in the first half of 2024, growing 1% in the first quarter and 1.4% year-on-year. The recovery comes after a period of weak demand due to high inflation and high interest rates in major markets.

However, the report highlighted that trade growth was uneven across regions. Europe’s performance lagged behind expectations, while other regions performed stronger than expected. The WTO is likely to revise its regional trade forecasts in a report expected in October.

The Goods Trade Barometer shows positive trends in most key trade components. The automotive products index (103.3), container shipping index (104.3) and air freight index (107.1) are all above trend. However, the electronic components index fell below trend at 95.4, while the new export orders index, a reliable trade predictor, has started to decline and is at 101.2.

Despite the optimistic outlook for a global trade recovery, the WTO warned that geopolitical tensions, regional conflicts and monetary policy changes posed risks to the outlook. Export orders also weakened, adding to uncertainty.

The next WTO forecast, expected in mid-October, will provide more clarity on how these risks will affect trade for the rest of the year. Driven by expectations of slower inflation and lower interest rates in advanced economies, the OECD and IMF forecast global trade growth of around 2.3% to 3.3% in 2024 and 2025. However, both organizations acknowledged that challenges remain and that real interest rates are likely to remain above neutral levels in the short term.