COLUMN Falling Air Freight Indicates Another Slowdown in the Global Economy: Kemp

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(John Kemp is a Reuters market analyst. The views expressed are his own.)

* Chartbook:

By John Kemp

LONDON, February 13 (Reuters). Global air freight started to weaken again last month after improving in the last quarter of 2019. This was a worrying sign that the emerging upswing in the global economy was in trouble before the worsening of the coronavirus crisis.

Airfreight volume is sensitive to changes in the business cycle, particularly in manufacturing and in global value chains (“Moving boxes by air: the economy of international airfreight”, Morrell and Klein, 2019).

Both the tonnage at the most important international freight centers and the tonne-kilometers traveled on the main routes are closely following the economic cycle (

The main trade routes are Asia-North America (around 20% of all international air freight per tonne-kilometer), Asia-Europe (20%), Europe-North America (10%) and Intra Asia (10%).

Air freight is more of a coincidence than an early indicator of economic activity. However, since freight data is available faster than other statistics, it can act as a canary in the mine and warn of major changes in the economy.

Airfreight growth through key hubs such as Hong Kong, Singapore and London-based Heathrow began to slow in mid-2017 and decreased year-on-year in late 2018.

The goods downturn worsened in the first nine months of 2019, when trade tensions between the U.S. and China worsened and global manufacturing activity fell.

However, from the end of the third quarter and the beginning of the fourth quarter, freight volumes showed signs of stabilization and even a slight improvement.

The improvement coincided with an upswing in financial markets, including US stock indices, and a normalization of the yield curve for US government bonds, suggesting that investors were more optimistic about the outlook.

This also corresponded to an upswing in the composite leading indicator for economic activity published by the Organization for Economic Cooperation and Development (OECD).


At the end of the third quarter, the worst economic slowdown seemed to be over. Investors expect a ceasefire between the United States and China, an increase in corporate investment and faster economic growth in 2020.

However, airfreight volumes weakened again in the first month of 2020, suggesting that the recovery will be running out of much of the Chinese manufacturing industry before the coronavirus epidemic closes in February.

Hong Kong International Airport, the busiest air freight hub in the world, reported a decrease in freight volume in January of almost 11% compared to the same month last year and 14% compared to 2018.

Hong Kong’s air cargo has been hit by a perfect storm of trade war, global slowdown in production, civil unrest in the Special Administrative Region and now the corona virus downturn in China.

However, London-based company Heathrow also reported that volume declined 11% in January compared to 2019 and 13% in 2018, indicating a far greater weakness.

The decline in air freight is likely to be much worse in February as many Chinese companies have been shut down to prevent the spread of the corona virus.

The risk now is that the corona virus will hit a fragile global economy after the 2018/19 downturn, with the slowdown focusing on China, but spreading across global supply chains across Asia and other regions.

Related columns:

– Hedge funds sell oil as the corona virus fuels fear of recession (Reuters, February 10).

– Corona virus and its effects on oil consumption (Reuters, February 4)

– Oil prices will rise in 2020 due to optimism about the economy (Reuters, December 17) (Edited by Alexandra Hudson)


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