World trade in commercial services lost momentum through the second quarter of 2019, the World Trade Organization (WTO) has said.
The global body’s new Services Trade Barometer (STB), launched on Tuesday, showed a reading of 98.4, suggesting a further weakening after services trade growth slowed during the first quarter of 2019. Readings of 100 indicate growth in line with medium-term trends, while readings greater than and below 100 indicate above-trend and below-trend growth, respectively. The direction of change reflects momentum compared to the previous month.
Declines in most of the component indices drove the second quarter softening, as they signalled a broad loss of momentum across various services sectors. The passenger air travel index (95.6), construction index (97.0), and global services Purchasing Managers’ Index (97.2) all fell further below trend in June, according to the WTO.
The financial services index (99.7) also dipped, finishing slightly below trend. The index for information and communication technology services (100.3), meanwhile, fell from well above trend in mid-2018 to on-trend in June. In contrast, the container shipping index (100.8) was slightly above trend and rising in June, following a multi-month slowdown.
Despite the overall loss of momentum since the start of 2019, services trade has generally held up better-than-goods trade since the latter is more directly affected by recent trade tensions. Unlike its counterpart for goods, the fluctuations registered by the services indicator coincide with movements in actual trade flows, rather than anticipating them.
The barometer is part of the WTO’s efforts to develop new insights into services trade and will be released twice annually.
In July, the WTO’s mid-year report underlined that trade flows hit by new restrictions continued to be at historically high levels between mid-October 2018 and mid-May 2019. Tensions leading to higher trade barriers and greater uncertainty pose downside risks to trade growth forecasts.
Last month, the WTO’s similar barometer for goods trade showed that international air freight (91.4) and electronic components (90.7) saw pace of growth falling by the highest margins. On the other hand, export orders (97.5), automobile production and sales (93.5) and agricultural raw materials (97.1) all remained below trend, although they show some signs of having bottomed out. Only the index for container shipping (99.0) was close to medium-trend growth levels.
India’s services exports, focused on the information technology and IT-enabled services have managed to fare better than global peers. In July, services exports stood at $19 billion, an 8 per cent rise.
Cumulative services exports stood at $74 billion in the first four months of the year.