DESPITE the continued strong momentum of the world's merchandise trade volume growth from the third quarter (Q3) of 2020 onwards, the pace is unlikely to sustain in the first half of 2021, according to the World Trade Organisation's (WTO) Goods Trade Barometer.

The Goods Trade Barometers provides real-time information on the trajectory of world merchandise trade relative to recent trends.

World trade in goods remained strong in Q4 after witnessing a rebound in Q3 from a deep COVID-19 induced slump, it showed.

"The barometer's current reading of 103.9 is above both the baseline value of 100 for the index and the previous reading of 100.7 from last November, signalling a marked improvement in merchandise trade since it dropped sharply in the first half of last year," the report said.

The WTO's most recent trade forecast predicted a 9.2 per cent drop in the volume of world merchandise trade in 2020, but the actual decline "may be slightly less severe" due to the strong performance in Q4.

However, the pace of expansion is unlikely to be sustained in H1 of 2021 since "key leading indicators appear to have already peaked," it added.

Indices for export orders and automotive products, which are among the most reliable leading indicators for world trade, have both peaked recently and started to lose momentum. In contrast, the container shipping and air freight indices are both still rising, although recent higher-frequency data suggest that container shipping has dipped since the start of the new year.

The indices for electronic components and raw materials are above trend, possible due to temporary stockpiling of inventories.

"Taken together, these trends suggests that trade's upward momentum may be about to peak if it has not already done so," it observed.

Furthermore, the indicator may not fully reflect resurgence of COVID-19, the appearance of new variants of the disease, and vaccine dissemination which will undoubtedly weigh on goods trade in Q1 of 2021.