While air cargo yields and volumes were up 7% and 2%, respectively, year-over-year for October, according to WorldACD, the latest release of DHL’s Global Trade Barometer assigns November air cargo trade its lowest index score since DHL launched the Barometer in January of this year. The falling outlook moving into peak season hints at larger underlying concerns in global trade and air freight demand as businesses brace for a US-China trade war of indeterminable length.
The Global Trade Barometer measures economic growth based on import and export data for select commodities and predicts the impact of the current environment on demand for air and ocean freight. It is published quarterly and measures the growth of global trade on a scale in which scores above 50 indicate expansion of global trade, while scores below 50 show that trade is shrinking.
In the latest outlook, global trade and air freight growth remain positive but have trended lower from 63 and 62 points for September, respectively, to 61 and 60 points for November – down from the much stronger values of 67 and 74 points in November 2017.
While the index has trended steadily lower over the past year, the most recent report is of particular concern because it indicates broader weakening of the global economy, rather than localized weakness in particular regions that has a dampening effect on the index as a whole, as was the case with some earlier releases of the Global Trade Barometer. In its most recent report on the results, DHL noted that “for the first time, the slowdown of global trade growth is due to a weakened growth outlook for all index countries.” On the air trade side, only China and the United States reported slight improvements of one point between September and November, while the wider trade index for both countries still declined over those months.
The slight growth in air freight for China and the US, and reported overall by WorldACD for October, appears promising in the lead-up to peak season, but as WorldACD indicates, it more likely suggests that businesses are stocking up before real trade pains from tariffs begin. According to its analysis, China-US air freight increased 4.5% in October, while US-China fell by the same percentage, and most of the trade on the China-US routes was from increases in vulnerable and high-tech goods. The increase in that cargo sector amounts to startling growth of 30.5% year-over-year, which is likely too large an increase to be explained by typical seasonal demand increases. As WorldACD concludes, trade dynamics for October are “more likely a case of US businesses stocking up before tariffs really start to bite.”Like This Post