June 2018: First month in two years without serious growth - No clarity on direction for remainder of the year

July 31, 2018

The worldwide air cargo yield stood at a level of USD 1.90 in June 2018, almost equal to our (updated) figure for May 2018, but still 13% higher than in June 2017. Measured in Euro's, the yield increased by 2% month-over-month (MoM), whilst the year-over-year (YoY) increase was 9%.

(See www.worldacd.com/yields for more yield developments)

It had to happen one day, or rather one month: no year-over-year (YoY) growth to speak of. June 2018 was that month: for the first time in two years, air cargo's worldwide volume growth stagnated as the YoY increase for the month was a mere 0.4%. Admittedly, the first half of 2018 brought an overall YoY growth of 3.7%, but this year-to-date growth % has slowly but surely decreased for a number of months now. Judging by the very diverse stories appearing in the trade press over the past weeks, our industry is clearly divided when it comes to the prospects for the second half of 2018. On the one hand, we read optimistic prognoses from some of the big forwarders, based mainly on what they see as a continuing capacity squeeze. On the other hand, people get worried about the (future) negative effects of the trade policies - real or only tweeted - of the unpredictable man in the White House.

Results for the early summer month of June may not be the best leading indicator for the rest of the year. Nonetheless, it is noteworthy that business from Asia Pacific to the other regions did not improve vis-a-vis June 2017: -0.1% YoY. Air cargo from the origins Africa, Europe and the Middle East also contracted YoY (MESA by almost 4%). The Americas, however, again bucked the worldwide trend: the USA enjoys high economic growth, whilst South America has been in 'catching up' mode for a number of months already. The worldwide yield continued to be much higher than a year ago.

What to make of these developments in the light of the uncertain times we live in? Should they be seen as a harbinger of times to come? Let us take a look at the June-figures for the markets most 'threatened' by the trade measures announced by Donald Trump.

Exports by air from China to the USA dipped considerably in June. Although this market had been sub-par for the full first half year of 2018 already (-2.9% YoY), the June figure of -5.9% YoY could be indicative of a worsening climate between the two economic powerhouses. By the way, China to Europe was also negative  in June (-2.9% YoY), but USA to Europe showed growth of 3.7% YoY, well above the worldwide average, albeit much lower than in the earlier months of 2018 when it topped 8%. With a YoY growth of 3%, USA exports by air to China grew more than the overall air cargo ex USA...

Who is to tell what results will be reported for July onwards, when the first tariff increases may start to bite. To us, the world of air cargo looks fairly uncertain at the moment: for once, to predict the future it may be just as helpful to read the tea leaves (as well as tweets?) or to gaze into a crystal ball.