“The World Trade Organization said the strong rebound in global trade during the third quarter may slow in the closing months of the year as nations battle a resurgence of the Covid-19 virus, according to a report issued Friday…Despite the stronger performance, the virus continues to create uncertainty on the global trading system, and the movement of goods is likely to slow in the fourth quarter as pent-up demand is exhausted and inventory restocking is completed.” (Bloomberg, ‎Nov.‎20‎, ‎2020)

There is quite a simple explanation for why global trade during the pandemic has recovered far faster than either the global economy or global employment.

The reason relates to the fact that the pandemic recession was far heavier of services than on goods; and secondly, that consumer spending on goods in the advanced economies has been strongly supported even as spending on services has been discouraged.

As Matthieu Arseneau and Alexandra Ducharme of the National Bank Financial explain in a recent article, it really also stems from the atypical nature of the pandemic recession.

“In a normal recession, consumers tend to reduce their consumption of goods more than their consumption of services. In the current downturn, however, it is consumption of services that has in many cases taken a hit from shutdown measures, leaving a larger share of spending to goods.”

In the US, for example, real consumer spending on services in October was 6.8% below its previous peak February level, while spending on goods was up a massive 8.4%. At the same time, there has also been some positive news on the revival of the manufacturing sector in the US.

Moreover, as the following chart illustrates, as of September the volume of global trade had fully recovered from the pandemic after only 7 months since the start of the US downturn.

The chart illustrates that the current trade recovery is four times faster than the 29-month recovery following the 2008-2009 financial crisis.

Clearly, the circumstances triggered by the 2008-09 financial crisis were far different than the current set of negative factors triggered by the pandemic.

Even though the pandemic pushed the global economy into its deepest slump since the Great Depression, global world trade has recovered more quickly from the pandemic than after the 2008 financial crisis.

In other words, this part of the world economy seems to be more V-shaped than the outlook for global GDP and employment.

(Click on image to enlarge)

(Click on image to enlarge)