Global trade is now slowing sharply after a rapid post-pandemic recovery in 2021 and 2022, Fitch Ratings has revealed in a new report.

Monetary tightening, fading fiscal support and service sector reopening are now weighing on global goods demand, which leaped extraordinarily during the pandemic.

According to the rating agency, world industrial production is also decelerating rapidly, adding “services trade is rising, but services production is less globally specialised”.

Fitch forecasts global trade growth of 1.9% in 2023, a sharp reduction from 5.5% in 2022. That would align it with global Gross Domestic Product, which it project to grow by 2%, down from 2.7% last year. Trade growth seems unlikely to outpace GDP in the medium term, as globalization stalls.

The volume of world trade in goods, according to Fitch, is now falling, partially offset by a recovery in services trade as tourism and transport rebound.

But services account for only 22% of total trade and this is not enough to fully cushion aggregate trade growth.

Supply-chain bottlenecks are no longer a key constraint on trade flows. The recent slowdown in trade now seems more a reflection of slowing demand.

US and global demand for consumer goods is weakening, which reflects the phase-out of US consumer-focused fiscal stimulus, monetary tightening and the rebalancing of demand back towards services after the lifting of Covid-19 restrictions.