Trade-related uncertainty remains high

Trade-related uncertainty remains high

World merchandise trade appears to have rebounded strongly in the third quarter of 2020, according to the World Trade Organization (WTO) Goods Trade Barometer, but whether this growth can be sustained going forward is unclear.

The Goods Trade Barometer's current reading of 100.7 marks a dramatic improvement from the 84.5 recorded last August, which reflected collapsing trade and output in the second quarter as lockdowns and travel restrictions were employed to fight the virus.

An easing of lockdowns helped trade in the third quarter but the WTO suggests growth is likely to slow in the fourth quarter as pent-up demand is exhausted and inventory restocking is completed.

Trade-related uncertainty remains high. A second wave of Covid-19 infection is already under way in Europe and North America, leading to renewed lockdowns that could trigger another round of business closures and financial distress.

The latest reading is consistent with the WTO's revised trade forecast of 6 October, which predicted a 9.2% decline in the volume of world merchandise trade in 2020. This outcome would require a sharp rebound in the third quarter following the 17.2% year-on-year decline registered in the second quarter.