A promising outlook takes a step backwards
29th June 2015
After a promising six month outlook noted in last months index, the outlook has since tempered. Combined with only a 0.1 point increase in the overall present situation for air freight and an almost 1.0 point decline in sea freights overall present situation, the Stifel Logistics Confidence Index slipped 0.5 points to 56.8.
Even though the overall index slipped from last month, it is still 1.6 points higher than the same period last year and 5.5 points higher than June 2013. While conditions have certainly improved, improvements have hit bumps throughout this prolonged economic recovery period and it appears we are undergoing through another one. Indeed, according to IATAs Director General and CEO, world trade is no longer expanding at a faster rate than domestic production.
In fact, this new mediocre in global trade as the IMF describes it will likely only be resolved if there is more trade liberalization and for advanced economies, a focus on more investment, services and coherent regulations. Until then, the road towards sustainable growth will continue to be a bumpy one.
Air
The air freight markets present situation saw little month to month change gaining only 0.1 points to 55.6. Compared to June 2014, however, it is up 5.7 points and up 13.6 points from June 2013. The global air freight market has made strong improvements since 2013 thanks to lower oil prices and improving economic conditions in the US and Europe. All tradelanes noted some growth with Europe to Asia and US to Europe each gaining the most, 0.8 points to 59.0 and 49.9 respectively. However, the Europe to US lane fell 1.5 points to 61.2 as the euro strengthened for the period.
The outlook improved only 0.2 points to 63.6. But, compared to last year, freight forwarders are more positive, up 5.9 points and from 2013, up 6.9 points. The most optimism appears to be for the US lanes with the US to Europe lane up 2.7 points to 59.4 and the Europe to US lane up 0.7 points to 64.5. Economic uncertainty in Asia continues to be a concern for these lanes as the outlook declined Europe to Asia down 1.5 points to 63.2 and Asia to Europe down 0.7 points to 66.4. This trend towards higher optimism for the US lanes seems to be a long-term one particularly the Europe to US lane, up 10.0 points from 2014 and up 6.5 points from 2013 whereas the Europe to Asia lane is up only 4.3 points from 2013 and up 4.0 points from 2014.
Sea
Port handling of larger ships, capacity and rate issues continue to be concerns for shippers and forwarders alike. As the issues relating to the US West Coast port situation begin to settle and other ports such as those in the Philippines look for ways to avoid a repeat of congestion problems, the present situation gained 0.9 points to 46.8. However, the present situation remains a concern because this is the second consecutive month it is below the 50-level and is now 5.4 points lower than June 2014 and 1.4 points lower than June 2013.
Three of the four lanes remain below the 50-level with the US to Europe lane slipping even further for the third consecutive month to 38.7. Confidence on this lane is 14.2 points lower than that of 2013 and 10.7 points lower from 2013.
The six month outlook also seems to be worsening, down 1.6 points to 61.3. Three of the lanes are down but there seems to be hope the US to Europe lane will improve from its dismal present situation, up 0.9 points to 55.6. Compared to 2014 and 2013, optimism for the outlook of sea freight still remains high.
One-Off Question
For Junes questions, we asked if container reliability had changed over the past year. 38.6% said it had decreased, 31.7% had seen an increase and 29.7% had seen no change. Asked about reliability in the year ahead, 51.5% expected an improvement, 15.8% thought reliability would degrade, and 32.7% expected it to be unchanged.
Take part in the latest Stifel Logistics Confidence Index.