US airfreight: Cautious optimism for H2 2024

U.S. airfreight import and export volumes continue to move in relation to the Manufacturing Purchasing Manufacturing Index, signaling strong performance in the airfreight industry.

The Manufacturing Purchasing Index (PMI) serves as a leading indicator of manufacturing activity and, by extension, demand for airfreight service. The index is a widely recognized indicator of the health of the manufacturing sector, reflecting economic activity based on new orders, inventory levels, production, supplier deliveries and employment conditions.

In July, the U.S. Manufacturing PMI declined to 49.6 from 51.6 in June, showing a slight contraction in the manufacturing sector for the first time this year. This decline was driven by a fall in orders and a reduction in employment growth, with hiring rising at the slowest rate since January. However, PMI forecasts remain above the 50-point threshold for the next four quarters and indicate growth ahead.

The map below shows the Manufacturing PMI across the United States, alongside data from multiple countries, covering PMI readings back to October 2022. If we click on the U.S., we see the trend indicates a stable and healthy improvement in PMI after a downward trend in 2022.

Map – Historical and Forecasted PMI by Country October 2022 - July 2024

Figure 1 below shows the development of the U.S. Manufacturing PMI since 2017 plotted against air export and import growth. The data indicates that air export and import growth has moved in tandem with PMI, exhibiting a strong correlation. Notably, since the end of the pandemic, there has been minimal divergence between these trends, highlighting the close relationship between manufacturing activity and airfreight volumes.

Figure 1 - US Manufacturing PMI vs Airfreight Export and Import Growth 2017 - June 2024 Despite the recent decline in PMI, forecasts suggest gradual improvement over the next six months, with expectations in the 53-point range and then cooling off to around 51 for the first half of 2025.

Figure 2 compares PMI with the forecast for U.S. export and import volumes through Q2 2025 against PMI. Cargo Facts Consulting expects 3% to 4% growth if PMI forecasts hold true going into 2025.

Figure 2 - US Air Cargo Import and Export Forecast July 2024 – June 2025 Several key airfreight-relevant U.S. indicators have been performing well amid some weakness:

Retail sales : U.S. retail sales increased by 2.3% year over year in June, a notable slowdown from the 7.7% growth seen earlier in the year. While e-commerce remains a strong driver, the overall trend indicates that consumers are becoming more price-sensitive, which could affect demand for air cargo as spending habits shift. Manufacturing PMI trends : The PMI reported at 49.6 in July, down from 51.6 in June, showing contraction in the manufacturing sector. This drop raises concerns about near-term airfreight demand, particularly if orders continue to decline. U.S. retail inventory-to-sales ratio : Retailers are exercising caution in inventory management, addressing surplus stock issues by adopting more conservative ordering practices. The inventory-to-sales ratio has been steadily rising, with the latest reading for May at 1.31, up from 1.27 a year prior. This trend indicates that retailers are likely to continue cautious ordering in response to mixed economic signals. To put this into perspective, a higher ratio, such as 2.5, would mean that retail stores have enough merchandise on hand to cover two and a half months of sales. Container shipping dynamics : The Red Sea conflict continues to disrupt container shipping, causing persistent volatility in ocean freight rates and capacity. Airfreight rates have become more attractive compared to sea freight. As of June, airfreight rates were approximately 8.1 times higher than sea freight, down from 26 times higher at the end of 2023. This narrowing gap, coupled with ongoing maritime route disruptions, is driving increased demand for air cargo, particularly for time-sensitive or high-value shipments. The situation echoes the air/sea freight ratio seen in 2021-22, with shippers seeking alternatives to unreliable ocean routes. Despite the contraction in the July PMI reading, forecasts for growth into 2025 are promising for the air cargo industry in the U.S. If these projections hold true, a corresponding increase in air cargo growth is anticipated, contributing to the sector's recovery.

However, with some indications of a potential slowdown, cautious optimism is warranted as we move forward.

US airfreight: Cautious optimism for H2 2024

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