The movement of merchandise between countries will slow down sharply in 2023, the World Trade Organization said Wednesday in its revised projections on the global trade of goods.

That’s because household budgets around the world are being squeezed, and demand for stuff, which surged early in the pandemic, has fallen off a cliff. 

Back in April, the WTO predicted global trade would grow by nearly 3.5% in 2023. Now, it’s walking that back to just 1%. 

Jacob Kirkegaard with the Peterson Institute for International Economics said that’s a gloomy sign for the global economy. 

“Global trade is heading into, if not a perfect storm, than at least very high seas and windy weather,” he said.

So what’s changed in the last five months? 

Jennifer Hillman with the Council on Foreign Relations said that depends on where you are in the world. 

“In the United States, we’re seeing significant monetary tightening as the Federal Reserve raises interest rates,” she said.

Meanwhile in Europe, she said, “the dominant story is high energy prices.” That’s caused in part by the war in Ukraine. 

And in some developing countries, Hillman said food insecurity is crushing demand for goods. 

On the supply side, there’s the manufacturing powerhouse China’s strict zero-COVID policy, said Christine McDaniel at George Mason University’s Mercatus Center. 

“You know, if there’s a flare-up in a particular region of the country that whole region or city will shut down,” she said.

That includes the factories that make a lot of what gets shipped around the world. 

The sum of all these economic shocks, said Jacob Kirkegaard, “means global trade will slow and global recession risk is certainly up.”

The good news? Softening demand for goods will give global supply chains some room to breathe and could help ease high inflation.