• Desmond Latham

Air cargo dip another bad sign for world trade


The International Air Transport Association (IATA) has released data for global air freight markets showing that demand fell 4.7% in April 2019, compared to the same period the year before.

According to IATA, air cargo volumes have been particularly volatile since the start of 2019 and says this is partly due to the timing of the Chinese New Year, but the trend “is increasingly downwards”.

IATA reports that the ongoing trade war between China and the USA, as well as Brexit-related uncertainly, has has also led to a slow down in air cargo

While freight capacity grew by 2.6% year-on-year in April, it is now outpacing demand and has been doing so for 12 months. Trends are now 3% below the August 2018 peak.

In the past 15 months export orders have only increased three times and the global indicator has been negative since September 2018,

“April saw a sharp decline in air cargo growth and the trend is clearly negative this year,” said IATA's Director General Alexandre de Juniac.

“Cost inputs are rising, trade tensions are affecting confidence, and global trade is weakening. Airlines are adjusting their capacity growth to try and fall into line with the dip in global trade since the end of 2018. It all adds up to a challenging year ahead for the cargo business. Governments should respond by easing trade barriers in order to drive economic activity,” he said.

But America and China remain at loggerheads when it comes to trade and tariffs, with the US increasing tariffs on close to $200 billion worth of goods and commodities.

However, African cargo trade continues to grow, bucking the trend in Europe, parts of Asia-Pacific and the Middle East. There, modest increases have been recorded, while Latin America and North America also experienced modest increases in growth in April 2019.

“As the world’s main manufacturing and assembly hub, the latest round of US tariffs is likely to negatively impact sentiment and activity in the region further,” IATA said about the Asian-Pacific slowdown.

AFRICA GROWING

In Africa, cargo trade grew 4.4% compared to the same period a year earlier and now sits more than 30% higher than in 2016. The big loser in terms of air cargo trade was the Asian-Pacific region, which saw demand for air freight contract by 7.4% in April 2019, compared to the same period in 2018.

That is the sixth consecutive month of falling, with international volumes down 8.1% compared with the level of a year ago. Latin America also recorded a rise in air cargo trade in April 2019 of 5.0% compared to the same period last year—a third consecutive month of positive FTK growth. But IATA said the Brazilian economy which is largely responsible for Latin American growth figures is showing signs of stress.

EUROPE AND MID-EAST SLOWING

European Airlines posted a sharp decline of 6.2% in freight demand in April 2019 compared to the same period a year earlier. Germany in particular saw a dip in export orders.

In the Middle East, freight volumes decreased 6.2% in April 2019 compared to 2018. There the air freight volumes have been declining since the fourth quarter of 2018. While freight volumes to and from Europe and Asia Pacific are growing, there’s a double-digit decline for the key North America market highlights some of the issues facing the region’s carriers.

IATA represents 290 airlines totaling 82% of global air traffic.

INVESTORS DIVING INTO BONDS

But it’s the bond market which is now predicting a poor economic end to 2019. Retail sales are down, business investment has hit the doldrums and manufacturers numbers show the slowest growth in almost a decade.

So many corporate and fund Investors have plunged into the relative safety of bonds while they’re selling equities. Some of these moves have been extreme, with the 10-year Treasury yield crimping by 8 basis points in one day, while yields of the 30-year bond fell to new lows. Economists believed recent numbers indicated the yields had hit the floor but they’re now close to 2.29%. That is the lowest level in two years.

Investors move into Bonds when the Stock Exchange starts showing signs of recession or profit weakness. The bond yield curve is one of the more accurate predictors of a recession and the fact that it has inverted for the second time in less than a year has economists worried that the fight that US President Donald Trump picked with China could be more damaging to the American economy than first believed.

Analysts said that Trump was merely using the threat of tariffs and other mechanisms in order to bolster his political position before the US elections in 2020 and that he would offer some kind of pragmatic solution to his Chinese counterpart.

However, the latest signs are that the US-China trade spat is going to take longer than initially thought, and the market is moving to address the weaknesses a trade war inevitably brings.

#AirCargo #Freight #Africa #USChinaTrade #MiddleEast #Economy #Recession #StockExchange

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