MACROECONOMICS
Air Freight
Quarterly overview of the majordevelopments on the macroeconomic landscape
Inflation in advanced economies cooled down for most of 2023. In December, US consumer inflation dropped to 3.4% year-on-year from its peak of 9.1% in June 2022. Similarly, Eurozone annual inflation was projected to be 2.9% in December 2023, down from its peak of 10.6% in October 2022.
Despite the hopeful signs of a soft landing due to the rapid cooling of inflation and low unemployment rates, both US and Eurozone annual inflation experienced slight upticks in December from November levels.
The persistence of inflation may lead to continued high borrowing costs (via high interest rates), in the foreseeable future. This will inevitably continue to impact consumer spending through increased costs of goods and services and weakening purchasing power.
Manufacturing activities stayed in contraction
Global manufacturing activities contracted further in December 2023, deteriorating at an even faster pace than the previous month.
The subindex for factory output in the S&P Manufacturing Purchasing Managers' Index (PMI) fell for the seventh consecutive month in December. Among the world’s largest economies, only India, Russia, and China showed increased manufacturing production in December.
Let’s take a closer look at manufacturing activities in China – the world's manufacturing powerhouse.
Here, the manufacturing sector expanded for the second successive month in December (source: Caixin) and attributed to improved output and new orders.
However, due to weak foreign demand, China's manufacturing PMI subindex for new export orders contracted for the sixth consecutive month, albeit at a slower pace.
This reflects a still-weakened outlook for global market demand, which is also evident in the air cargo industry. Despite recent improvements, most stakeholders in the air cargo market anticipate subdued air cargo demand until at least midway through 2024. The December global air cargo demand remained 6% below its 2019 level for the same month.
The Xeneta outlook for air cargo demand in 2024 remains unchanged, with the growth of global air cargo demand, measured in chargeable weight, expected to be around 1-2% year-on-year. (More details can be found in Xeneta 2024 outlook for air freight.)
