A partial and uneven world trade rebound

Various indicators suggest world trade is recovering but the rebound is partial and uneven across regions, sectors, and other dimensions. Our baseline is for world goods trade to fall around 7% over the full 2020 and services trade by 21%, before a major rebound next year.

Incoming evidence broadly supports our baseline forecasts for world trade, but a key risk is that renewed restrictions in major economies, such as Europe, cause trade to slump again. Recent UK daily port traffic data hints at this.

Our leading indicators suggest a significant improvement in world goods trade in August and September, after double-digit falls in Q2 and early Q3. Still, these indicators point to trade being lower than a year earlier.

Seaborne freight has recovered much better than air freight. Latest figures for Chinese and US West Coast freight point to a rebound in trans-Pacific trade but the Asian rebound is inconsistent across economies.

Export surveys for China, the US, and Germany have recovered to pre-crisis levels, although actual trade volumes are lagging in the latter two cases. Surveys in the UK, France, and South Korea remain relatively depressed, however.

Services trade is recovering more slowly than goods. Some sectors are performing relatively well, notably financial services. But others, such as travel and transport, remain a very large drag on overall services trade.

China’s strong trade recovery stands out, helped by a surge in demand for some Chinese products such as textiles, pharma, and electronics. Notably, rising US demand has reversed some of the export losses from higher tariffs.

Topics: Coronavirus