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WTO TRADE BAROMETERS
Global services trade recovering but below pre-pandemic levels, WTO barometer indicates
The recovery in global services trade looks set to extend into the third quarter of 2021.
The latest barometer index reading of 102.5 is above the global services trade activity index and above the baseline value of 100, suggesting that the volume of services trade in the second and third quarters — for which official statistics are not yet available — will continue to recover. However, the fact that the indicator has recently turned downwards suggests that the expansion may proceed along a new, lower trajectory if the COVID-19 pandemic turns out to have a persistent impact on services trade.
In the first quarter of 2021, world services trade was down 13.9% year-on-year according to the global services activity index, which provides an approximate measure of the volume of world services trade, taking changes in exchange rates and inflation into account. Services trade fell sharply in the early stages of the pandemic but, in contrast to goods trade, it has only staged a partial recovery since then. The recent performance of services trade differs from the financial crisis of 2008-09, when services trade was more resilient than goods trade. The difference is largely due to the fact that the pandemic continues to weigh on travel and tourism. Year-on-year growth of services trade should turn strongly positive in the second quarter, mostly due to a lower base in the previous year.
Most component indices are on or above trend, but the overall picture is mixed. The global services Purchasing Managers' Index (102.7) and financial services index (100.2) have turned down after peaking but remain above trend, suggesting an easing of the pace of recovery in services. On a more positive note, the index of information and communications technology services (100.0) has climbed back to trend. The index for passenger air transport (105.6) has rebounded recently but appears to be stabilizing below pre-pandemic levels. Growth in the container shipping index (106.8) has eased although throughput has hit a record high. The recent surge in shipping costs appears to be more due to strong demand for traded goods than to supply constraints. Construction is the only component to have dipped below trend recently (97.4).
Unlike its counterpart for goods, fluctuations in the Services Trade Barometer tend to coincide with movements in actual trade flows rather than anticipating them. Readings of 100 indicate growth in line with medium-term trends. Readings greater than 100 suggest above-trend growth while those below 100 indicate the opposite.
The full Services Trade Barometer is available here.
Further details on the methodology are contained in the technical note here.
