Growth prospects for the international express and freight sectors this year are looking uncertain after a downbeat 2.8% international trade increase forecast from the World Trade Organization (WTO) and mixed air cargo trends in the first two months of 2016.
The WTO warned yesterday that trade growth would remain “subdued” this year as diverse uncertainties weigh on global demand. Its 2.8% growth forecast for this year is the same figure as for 2015 and would make 2016 the fifth year in a row when world trade grew at roughly the same rate as world GDP (at market exchange rates), rather than twice as fast as was previously the case. The forecast is based on consensus estimates of world GDP growth of 2.4% this year.
Risks to the trade forecasts “remain tilted to the downside”, the organisation noted. Business and consumer confidence has slipped recently in developed countries, and forecasters now expect slower GDP growth in the European Union and the United States in 2016, followed by a rebound in 2017. Financial instability in Asia has mostly abated but could return if economic data come in above or below market expectations. On the other hand, more accommodative monetary policy from the European Central Bank could spur growth in the euro area and boost demand for goods and services, including imports, according to the WTO.
“Trade is still registering positive growth, albeit at a disappointing rate,” WTO Director-General Roberto Azevêdo said. “This will be the fifth consecutive year of trade growth below 3%. Moreover, while the volume of global trade is growing, its value has fallen because of shifting exchange rates and falls in commodity prices. This could undermine fragile economic growth in vulnerable developing countries. There remains as well the threat of creeping protectionism as many governments continue to apply trade restrictions and the stock of these barriers continues to grow.”
Imports of developed countries should moderate this year while demand for imported goods in developing Asian economies should pick up, the WTO predicted. Exports of developed and developing countries should grow at around the same rate in 2016, 2.9% in the former and 2.8% in the latter. Meanwhile, imports of developed economies are expected to outpace those of developing countries in 2016, with a 3.3% rise in the former compared to a 1.8% increase in the latter.
At a regional level, Asia is expected to record the fastest export growth of any region this year at 3.4%, followed by North America and Europe, each at 3.1%. South and Central America and Other regions will lag behind at 1.9% and 0.4%, respectively.
In terms of imports, North America should see a 4.1% increase this year, while Asian and European imports should both register growth of 3.2%, but imports of South and Central America and Other regions are set to contract again this year, according to the WTO.
The organisation’s trade forecasts came the day after IATA issued figures showing low underlying growth in the first two months of 2016 for the international air cargo sector, which represents about one third of global trade by value.
In February, air cargo volumes (measured in freight tonne kilometers or FTKs) suffered a 5.6% fall year-on-year, but this figure was heavily impacted by the US port strikes in early 2015 (which caused a spike in air freight) and Lunar New Year falling in February this year. Comparing January and February 2016 performance to January and February 2014 reveals 6.3% volume in growth, equal to a 3.1% annualised growth trend, IATA said.
At a regional level, Asia-Pacific carriers, which carry almost 39% of all air freight, saw FTKs contract by 12.4% year-over-year in February. While this was the largest drop of any region, it also reflects the region’s carriers having benefited the most from the 2015 US port strike. And the region’s weak trading backdrop was exaggerated by the closure of many factories in Asia for the Lunar New Year Celebration. In February, Chinese export values fell 25%, IATA noted.
Elsewhere, European airlines’ demand fell by 2.4% and North American airlines saw FTKs fall 4% but Middle Eastern carriers remained on the growth path with a 3.7% volume increase while Latin American carriers expanded by 2.7% in February despite the recession in Brazil.
“The air freight business remains a difficult one. February’s performance continues a weak trend. And there are few factors on the horizon that would see this change substantially. In the absence of an imminent resurgence of demand, the importance of improving the value proposition with modernized processes remains a top priority,” said Tony Tyler, IATA’s Director General and CEO.
