The slowdown in freight demand growth in 2018 has been consistent with the typical pattern following inventory restocking cycles in the past. However, the loss of upward momentum in recent months appears to illustrate the increasing headwinds to freight demand from renewed signs of weakness in global economic activity.

Much of the moderation in FTK
 (freight tonne kilometres )growth that we have seen over the past year or so has reflected the typical pattern seen after inventory restocking cycles in the past. Recall that air freight volumes grew much faster than global goods trade during 2017 as firms turned to the speed afforded by air freight to restock their inventory levels quickly.

These are perhaps most evident in the new export orders component of the global manufacturing Purchasing Managers’ Index (PMI), which has proven to be a reliable leading indicator of industry-wide FTK growth in the past. The series has now fallen in month-on-month terms in 10 of the last 11 months, and has been below the 50-mark (ie, territory normally associated with falling export orders) since September. At current levels, the indicator continues to suggest that annual FTK growth is unlikely to pick up sharply anytime soon.

North American airlines top the growth chart… Airlines based in North America topped the international FTK growth chart in November for the sixth consecutive month (3.9% year-on-year). The strength of consumer spending and the wider US economy has supported FTK growth for North American airlines over the past year or so.1 However, more than half of this annual growth reflects gains made in Q2 2018; SA volumes have been trending downwards at a 4% annualized pace since the middle of last year. …as European FTK growth stagnates Year-on-year growth in international FTKs flown by European airlines fell to zero in November, down from 1.6% in the previous month. Traffic is still trending upwards in SA terms but only at a very modest pace. This corresponds with wider weakness in European manufacturers’ export order books, particularly in Germany
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