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Global Service Trade Decline Indicates Signs of Bottoming Out, Says WTO

COVID-19 has led to disruptions and contractions in global trades among services. On Thursday, the World Trade Organization mentioned the issues with the trade barometer index dropping to a record low.

As far as the barometer for services goes, WTO gets published twice per year but still dropped 95.6 points from the initial March reading of 96.8. Below 100 readings imply trade growth less than medium-term trends.

“The barometer’s measures are in aggregate outperforming recent trends in actual services trade, a gap that in the past has preceded a positive shift in trade momentum,” the WTO said.

The WTO services trade barometer is a composite of data on purchasing manager indexes, financial transactions, IT services, passenger flights, container shipping and building permits.

Design purposes focus on the identification of turning points and global trade growth instead of the short-term forecast.

The biggest hit was endured by passenger air travel, reading at 49.2 weighings on the total index, even with recent indications of stabilization.

The sub-indices for container shipping, construction, IT services and the global purchasing managers’ index were all in the 90s. Only financial services, at 100.3, was around the mid-term trend this month.

Further information by the WTO indicated the drop-in service trade volumes by 4.3 per cent following the primary quarter of 2020 from a year earlier. This was not as sharp a drop as the 5.1 per cent during the financial crisis in the first three months of 2009, and the 8.9 per cent slump the next quarter.

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