IATA has slashed its outlook for cargo growth over the coming 12 months as the US-China tariff dispute took more of a toll on performance than expected.
Speaking at the IATA World Cargo Symposium in Singapore, the organisation’s chief economist Brian Pearce lowered its growth projection for freight tonne kms (FTK) to 2% from its expectation of a 3.7% increase reported in December.
Pearce said the reason for the decrease was the larger than expected impact of the US-China tariff dispute.
He said that while the dispute was ongoing in December, the impact had been larger than expected, with companies transporting stock in the middle of last year to beat the implementation of the tariffs.
Pearce pointed out that in January, the industry saw FTKs decline by 1.8%. There was also a decline in February, which has yet to be finalised.
With two months of the year seeing a decrease, it would become harder to meet the 3.7% prediction.
As well as this, overall trade weakness in Asia and the US towards the end of last year added to an already weak performance in Europe.
He added that the “hard reality” was that over the last 12 months – when seasonal effects are stripped out of performance – the industry had posted no growth.
Pearce said that with trade indicators still in negative territory the industry is expected to decline for a while longer.
The flat growth reported over the last 12 months ago is down to the ending of a restocking cycle, combined with weaker trade outlook and the world entering a phase of unilateralism.
Looking ahead, there is ongoing concern about the impact of Brexit on trade, the future of the China-US trade dispute and the potential of a dispute between the US and Europe over the automotive industry.
The latter could have a greater impact than the China-US dispute as automotive volumes are more likely to be transported by air than the chemicals and metals that were largely affected by the transpacific dispute.
However, Pearce said it was not all bad news for air cargo. He pointed out that GDP growth projections were “not too bad” with expectations of improvements of between 2.5% to 3%.
After a dip in 2019, the trade forecast was also on the up, while growth in key economies “looks reasonable”.
Meanwhile, governments are increasingly turning away from austerity, central banks continue to maintain support and the cost of serving debt is low.
Pearce also added that air cargo had improved its share of world trade since 2013.
The metric had been in decline since the early- to mid-2000s as shippers switched to seafreight.
This is expected to continue to rise over the coming years as speed of transport becomes an increasingly important consideration when choosing which mode to opt for due to the rise of e-commerce.
