Trade growth was positive for both goods and services in the first quarter of the year, intergovernmental organisation the United Nations Conference on Trade and Development (Unctad) reports in its latest global trade update.

After the downturn in the second half of last year, world merchandise trade rebounded in both volume and value.

Over the first three months of this year, trade in goods went up by 1.9% quarter-on-quarter, adding about $100-billion. Global services trade also increased by about $50-billion – an increase of about 2.8% quarter-on-quarter.

For the second quarter of this year, Unctad expects a slowdown in global trade growth, pointing to recently downgraded world economic forecasts and factors.

These factors include persistent inflation, financial vulnerabilities, the war in Ukraine and geopolitical tensions.

“Overall, the outlook for global trade in the second half of 2023 is pessimistic, as negative factors dominate the positive,” the report says.

‘FRIEND-SHORING’

The geographical proximity of international trade has remained relatively stable over the last five quarters, suggesting a lack of significant nearshoring or farshoring trends, at least on average, Unctad states.

The report points out that “friend-shoring” has been on the rise since late last year, characterised by a reorientation of bilateral trade flows to prioritise countries that share similar political values.

The war in Ukraine, the decoupling of US-China trade interdependence and the consequences of Brexit have played a significant role in shaping key bilateral trade trends during this period.

“Concurrently, there has been a decline in diversification of trade partners, implying that global trade has become more concentrated among major trade relationships,” the report notes.

The report illustrates the ongoing decline in trade interdependence between the US and China. The report also shows that over the past year and a half, the US has become relatively less significant as an export market for China.

During this period, the US' dependency on China as a supplier has decreased even further.

Meanwhile, the report shows that merchandise trade growth has been mixed among the world’s major economies during the last four quarters.

Brazil, India, the US and the European Union saw significant increases in both imports and exports.

On a quarter-on-quarter basis, however, trade trends for major economies were more subdued between January and March this year, and in many cases negative. The notable exception is significant growth in exports from China and India.

On a yearly basis, all regions saw international trade grow, except for the Russian Federation and central Asian economies.

But the growth in the East Asian region has been significantly below average.

On a quarter-over-quarter basis, the first quarter of this year witnessed a decline in the value of trade in most regions. This differed from the Pacific region, North America and Africa, which experienced marginal growth.

Intra-regional trade during the same period followed similar patterns. Notably, however, trade within Africa increased by 3%, outperforming other intra-regional trade.

SECTORAL BREAKDOWN
Global trade trends over the past four quarters were influenced by the energy sector, where rising prices resulted in higher trade values, until an 11% quarterly drop between January and March this year.

Other sectors that experienced trade increases were agri-food prod­ucts, apparel, chemicals and road vehicles.

Conversely, trade declined in office and communication equipment, as well as transport, where downward trends continued into the first quarter of this year.