IATA: Air cargo performance weak, but room for cautious optimism in medium term

IATA released (15-Mar-2016) its 'Cargo Chartbook' for 1Q2016. Key highlights include:

Air cargo:

• Air cargo performance in 2015 was weak, although it benefited from increasing share of global growth originated in advanced economies in 2015;
• Dec-2015 levels point to year-on-year growth of just 1.4% in FTKs. Compared to 2014, volume year-to-Dec FTK growth was 2.2%;
• Global Purchasing Managers' Index for export orders dipped into contractionary territory in Feb-2016, suggesting short term downward pressure on air cargo growth;
• The increase in business inventories to sales ratio offers another explanation on the weakness observed in FTKs;
• Lower oil prices have brought freighter capacity out of storage, which can put further downward pressure on yields;
• The pace of retirement of older aircraft has continued to slow, with retirements of only two aircraft in 4Q2015 and one aircraft so far in 1Q2016;
• Growth in FTKs had positive momentum since 2H2015 and into Jan-2016. IATA forecast for 2016 points to acceleration in air cargo growth - FT and FTK growth of 2.7% and 3.0% respectively;

Economic outlook:

• Global growth continued to perform below its potential - "new mediocre" growth is now the new reality. Global trade growth has been weak in 2015, Dec-2015 levels were up just 0.6%, growing slower than air cargo;
• The combination of heightened financial market volatility and threat of deflationary pressure add to risks to the forecast and the global recovery;
• Advanced economies continued to expand but the rate of growth has slowed. There has been a drop in US growth, although underlying demand drivers look positive, with unemployment continuing to fall:
• • Broad based growth has continued in the eurozone, aided by lower oil prices, but weaker exports create headwinds.
  • The slowdown and rebalancing in China has put commodity exporters under severe pressure;
  • The Brazilian economy is expected to shrink by 3.2% in 2016;
  • India, a net commodity importer, is set to be the best performing major emerging economy in 2016;
• Subdued expectations on export orders and poor performance of semi-conductor shipments point to downward pressure for air cargo growth;
• In the medium term, strong consumer confidence and lagged impact of lower oil prices leave room for cautious optimism. [more - original PR]