Supply chain logjams and macroeconomic headwinds look set to put the brakes on global merchandise trade’s post-Covid comeback, the latest industry data show.

According to a new report from the United Nations Conference on Trade and Development (UNCTAD), the overall value of global trade reached a historic high of US$28.5tn last year, an increase of 13% from 2019.

While most global trade growth took hold during the first six months of 2021, progress also continued into the second half of the year, with goods trade reaching record levels of US$5.8tn in Q4.

Commodity-exporting regions saw particularly robust trade growth in the final quarter of 2021 due to rising prices for goods such as fuel, metals and chemicals, and developing countries outperformed their developed counterparts.

However, while global trade growth accelerated in the final three months of last year, UNCTAD says it is expected to slow in Q1 2022 – with trade in goods and services expected to plateau at a similar level to that seen in Q4.

Overall, the UN predicts trade growth levels will remain “subdued” throughout the course of the year.

“The positive trend for international trade in 2021 was largely the result of increases in commodity prices, subsiding pandemic restrictions and a strong recovery in demand due to economic stimulus packages… As these trends are likely to abate, international trade trends are expected to normalise during 2022,” the UN says.

It warns trade growth could mirror wider macroeconomic trends and ultimately be “lower than expected”.

It flags as potential downside risks inflation in the US, where the price of goods and services rose 7% in December, a high not seen in decades, as well as mounting concerns over China’s real estate sector.

The UN report also points to issues surrounding record levels of global debt, which are “likely to intensify” in the incoming quarters due to mounting inflationary pressures.

“A significant tightening of financial conditions would heighten pressure on the most highly indebted governments, amplifying vulnerabilities and negatively affecting investments and international trade flows,” it adds.


No let up for supply chains?

Newly released data from the World Trade Organization (WTO) also show that trade growth is set to stall this quarter as logistical challenges continue to roil companies involved in international commerce.

The WTO goods trade barometer, published on a quarterly basis by the intergovernmental organisation, signals changes in world trade growth two to three months ahead of official merchandise trade volume statistics.

In August, with trade roaring back in the first half of 2021, the barometer was well above the baseline trend of 100, but since fell to 99.5 in November, with a further drop to 98.7 in the latest WTO report out this month.

The index’s current reading is broadly consistent with a revised trade forecast published by the WTO in early October which predicted global merchandise trade volume growth of 10.8% in 2021 – up from 8% as forecast in March – followed by a 4.7% rise in 2022. The forecast also predicted that the post-pandemic rebound in global merchandise trade levels would taper off in the second half of 2021.

But the WTO says the latest index indicates a “loss of momentum” in trade at the start of 2022.

“In addition to ongoing supply chain disruptions, the barometer’s weakness is partly explained by the introduction of health restrictions to combat the Omicron wave of Covid-19,” the WTO says.

The WTO barometer is comprised of various individual indices that are combined to provide an overall score – and the majority of these saw a decline from the previous reading in November.

The automotive index staged a relative comeback from November, when it plunged to 85.9 as a result of ongoing difficulties for carmakers in sourcing semiconductors. Nonetheless, the sector’s index still came in firmly below the baseline at 92 in the latest report.

The container shipping index (97.2) dipped even further below trend in the wake of ongoing port congestion issues.

“Container throughput of major ports has plateaued at a very high level. Purchasing managers indices show delivery times coming down gradually worldwide, but not fast enough for many producers and consumers,” the WTO says.

The electronic components index also fell to 98.6 despite the reported easing of semiconductor supply issues.

Only two indices came in above the baseline value, raw materials (101.6) and air freight (101.7).

While such figures indicate a dimmer outlook for trade this year, the WTO says they could imply supply chain pressures are starting to ease, with the index showing signs of “bottoming out”.

But others are less sure.

Analysis this week from trade credit insurer Coface has cast doubt on the possibility of supply chain pressures improving progressively in the first half of the year, labelling this timeline “overly optimistic”.

“Disruptions and material shortages are likely to continue,” it adds.

Coface says there is a risk China’s aggressive “zero-Covid” approach, which consists of enforcing local lockdowns to contain the smallest of outbreaks, could trigger strict lockdowns related to Omicron.

“That could exacerbate supply chain issues and create a massive global bottleneck,” it says.