Monday, 14 September 2015

What air cargo can tell us about the global economy

Every now and then, a news article reminds us that air cargo is, or has been, considered a bellwether of the state of the global economy. As the Wall Street Journal recently explained, in an article on the stumbling Chinese economy:

“Air cargo is widely tracked as a leading indicator for trade because shippers deciding whether to send items by plane are often swayed by last-minute economic developments. The recent drop in volumes has analysts concerned, even as maritime shipping out of Asia has remained healthy.”

This follows a stagnant couple of months in the air cargo market, where volume grew only 0.7% in July—the lowest of the year. A drop in air cargo traffic to and from China is specifically viewed as evidence that the economy is wobbling, in the wake of the Chinese government devaluing the yuan in order to reinvigorate exports. This was followed by plummeting Chinese stock markets and worldwide drops in share prices.

In the same way that Chinese exports have an impact on the overall volume of global air freight, so too does the Chinese economy affect the global economy—and one is often a good indication of the other. So when economists aren't seeing growth in air cargo, it could very well be a symptom of a larger problem.

Freightfully important

Part of this connection is because air freight is itself a huge facilitator of global trade. According to the International Air Transport Association (IATA), over US$6.4 trillion worth of goods—approximately 35% of world trade by value—is transported by air cargo. This is because air cargo supply chains make it possible to deliver high quality goods efficiently and at relatively economical prices.

The IATA is also quick to point out that air cargo creates millions of jobs, as well as being a vital component in the implementation of worldwide health and immunisation programmes, not to mention disaster aid.

As such, air freight is viewed as a reliable indicator of economic changes not merely because it reflects the ebbs and flows of the economy, but because it plays its own massive role in global trade.

So one way or the other, it makes sense for the analysts to keep a close eye—and to worry a little at signs of stagnation, even when there may be growth in other areas like sea freight.

Transglobal Express offers worldwide freight forwarding with all major carriers. To keep up to date with air freight industry news, follow our news and updates

(Image credits: John Murphy, Robert Stanklewicz under a Creative Commons 2.0 license.)

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