Global trade flows continued to increase in May, a fresh sign that the world economy is continuing to recover from the impact of the Covid-19 pandemic, despite the spread of new variants of the virus.
An early indicator of trade flows developed by The Wall Street Journal and published for the first time Monday points to a 1.18% rise in May from the previous month, adjusted for the seasonal ups and downs of exports of goods between countries.
That was a slightly smaller increase than the rise recorded in April, but is consistent with other indicators that suggest the global economy enjoyed a strong expansion during the second quarter.
Compared with the same month a year earlier, trade flows were up 46%, a reflection of how deep the decline in volumes was in the early months of the pandemic, when strict lockdowns were more widespread than they were in May.
Trade in goods has bounced back much more quickly after the initial blow struck by the pandemic than they did in the wake of the global financial crisis that began in 2008.
That is partly because the adjustment to the pandemic through working and schooling from home led to a surge in demand for a wide range of goods, including laptop computers and office furniture. Households were able to increase their spending on goods in part because their opportunities to spend on services were limited, and governments helped out through furlough schemes or direct transfers of money.
The big question for trade in goods as the recovery progresses is whether that demand for goods will ease as opportunities to spend on services–such as international tourism–open up again.
The May trade indicator suggests that, for now, the reopening hasn’t led to a significant slowdown in trade.
However, other indicators do point to a possible easing in coming months. According to a global survey of purchasing managers at manufacturing companies compiled by data firm IHS Markit, new export orders continued to increase in June, but at a slower pace than in May.
To calculate its early indicator of global merchandise trade value, the Journal uses data from eight countries with rapidly-available trade figures in six regions. The eight countries together represented 39.1% of worldwide merchandise export value in 2019, according to the World Trade Organization. To account for the remaining 60.9%, the Journal computes scaling factors for each region, based on the size of the region’s missing share.