Market Overview

IATA: Slowdown In Airfreight Demand Accelerated In August

IATA: Slowdown In Airfreight Demand Accelerated In August

The International Air Transport Association said Wednesday that global demand for airfreight declined at a faster rate in August than July, contracting 3.9% compared to 2.4% the month before. And international airfreight volume fell 4.6% year-over-year versus the 3.3% decline in the previous month.

The July figure is a revision from the previously reported decline in shipping activity of 3.2%.

The Oct. 9 IATA report confirms what airlines and logistics companies continue to experience in the third quarter: a softening in demand due to trade tensions between the U.S. and China and economic weakness in key markets such as Europe.

August marked the 10th consecutive month of year-over-year declines in freight volumes, the longest period since the global financial crisis in 2008. The pinch has been greatest in the Asia-Pacific market, accounting for almost half of the overall contraction due to its size, but the weakest region was the Middle East, with volumes down 6.6% from August 2018. The lone exception was Africa, which grew 8% in volume, as measured in freight ton kilometers. But it only accounts for 1.6% of the airfreight market.

Meanwhile, airlines added 2% more capacity in August — the 16th consecutive month in which capacity growth has exceeded demand growth. The gap led to a 2.7% fall in the average load factor — how much available space in an airplane is filled with cargo.

Global trade volumes are 1% lower than a year ago, with trade slowing more in emerging economies than advanced nations. Experts say the manufacturing sector is in a global recession. Global export orders have been falling for the past year, based on the global Purchasing Managers Index. For the second month in a row, all major trading nations reported falling orders. In the U.S., industrial production has fallen from its December 2018 peak, according to the Federal Reserve.

The uncertainty is causing businesses to postpone making investments and hiring new people.

The situation is likely to get worse for the air cargo industry — and freight transportation in general — in the near future. Consensus among forecasters at the National Association for Business Economics is that the U.S. economy will slow to 2.3% growth this year from 2.9% in 2018 and then to 1.8% in 2020. Last month, the Business Roundtable, which represents corporate chief executives, said its members' economic outlook fell sharply in the third quarter. And the Organization for Economic Cooperation and Development downgraded its global economic outlook for 2019 to 2.9% and 3% next year.

IATA said that after correcting for seasonal factors, the airfreight market has actually stabilized, but at a 4.4% lower level than in mid-2018. 

Image Sourced from Pixabay

Posted-In: air carog Freight Freightwaves Logistics Supply ChainNews Markets General


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