The volume of world merchandise trade fell 0.8% in the third quarter of 2021 after four consecutive quarters of strong expansion, as supply chain disruptions, shortages of production inputs and rising COVID-19 cases weighed on trade growth.
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Despite strong headwinds contributing to the decline in the third quarter, trade volume was still up 11.9% for the year to date through September. This is slightly worse than the WTO's most recent trade forecast of 4 October, which anticipated a 12.7% rise over the same period.
The forecast of a 10.8% increase in merchandise trade for the whole of 2021 could still be realized if fourth quarter data show a pickup in volume growth. This is a real possibility since measures to unblock container ports on the west coast of the United States have met with some success.
Also, even though the WTO's Goods Trade Barometer has signalled a cooling of trade growth in the closing months of 2021, it still remains on trend. Nevertheless, the emergence of the Omicron variant of SARS CoV 2appears to have tipped the balance of risks towards the downside, increasing the chance of a more negative outcome.
Trade values were boosted by primary commodities including fuels, prices of which more than doubled between the third quarter of 2020 and the third quarter of 2021. According to IMF statistics, Fuel prices dipped in November after peaking in October, but they were still up 137% year on year. Meanwhile, food prices were up 23% and base metals were up 13% over the previous year. Prices of many manufactured goods have also risen, pushing up measured inflation in many economies.
The main reason for the dip in merchandise trade volume in the third quarter was weaker than forecasted imports in North America and Europe. This translated into reduced exports from those regions and also from Asia (Chart 2). Asian imports contracted in the third quarter, but this decline was anticipated in the October trade forecast.
Seasonally adjusted exports were down quarter on quarter in the third quarter in North America (‑1.9%), South and Central America (‑2.5%), Europe (‑1.0%), Africa (‑3.8%) and Asia (‑1.2). Exports were up in the Commonwealth of Independent States (CIS) including certain former and associate members (3.8%) and in the Middle East (2.6%).
Imports declined by 0.5% in Europe in the third quarter, even though they had been expected to grow 2.6%. Imports also fell in the third quarter in the CIS (‑3.2%), Africa (‑0.7%), and Asia ( 1.3%). North America's imports were up 0.4% in the third quarter, but a stronger increase of 1.5% had been anticipated. Meanwhile, shipments from South America and the Middle East were up 0.4% and 1.6%.
Trade flows of manufacture goods and agricultural products were up a similar amount in the third quarter, 21% and 18% respectively compared to the previous year. Trade in fuels and mining products was up 71% over the same period, boosted by a four fold rise in natural gas prices.
Some sectors showed strong increases in the third quarter, including iron and steel (73%), electronic components (26%), pharmaceuticals (22%), and other chemicals (31%). Others showed stagnation or decline, including automotive products (0%), telecommunications equipment (5%), clothing (5%) and textiles ( 7%).
Weakness in automotive products and telecommunications equipment reflects the recent shortage of semiconductors, which closed assembly lines for products that use of these inputs intensively. The category of textiles includes surgical masks, which surged earlier in the pandemic. The higher baseline for these products may explain their decline in the third quarter.
Container handling in 2021 is up by around 9% year to date through October, which is comparable to merchandise trade volume growth over the same period. This indicator is worth monitoring for signs of an eventual pickup or downturn in trade. ■