The latest air freight data is a clear sign that global economy is descending fast
- Global air freight declined for the eighth month in a row signalling a sharp slowdown in trade.
- Total freight tonne kilometres decreased 4.8% in June 2018 compared to the same time last year.
- The sharpest fall was seen in the Middle East and Asia-Pacific, which together make up nearly half of the world's share of air freight.
This is the surest sign of a deepening slowdown in world economy.
Global air freight declined for the eighth month in a row signalling a sharp slowdown in trade. Total freight tonne kilometres, the measure of a flight's cargo carrying capacity, decreased 4.8% in June 2018 compared to the same time last year, according to latest data from the International Air Transport Association.
This is the eighth straight monthly decline in global air freight. Global trade has been hit badly over the past year as a tariff war between the United States and China escalated and hurt business sentiment.
The Asia-Pacific region, mostly made up of countries dependent on exports, were the worst hit (down 5.4%) after the Middle East, which exports oil. Together, these two regions make up nearly half of the global trade.
While Donald Trump's trade war with China did have an impact on trade in the Asia-Pacific region, it was not the only reason. Air freight traffic within Asia has decreased more than 10% over the past year, IATA revealed.
Africa, the bright spot
African carriers were the only ones to report growth in June 2019, with an increase in demand of 3.8% compared to the same period a year earlier. This makes Africa the strongest performer for the fourth consecutive month. The traffic between Africa and Asia was up 12% year-on-year in June.
All eyes on Donald Trump
There may be more pain store because there is no sign of thaw between the Trump administration in the US and the Chinese government under Xi Jinping.
President Trump announced a new set of tariffs on August 1, hitting $300 billion worth of Chinese products with 10% tariffs starting September 1. About $250 billion of Chinese imports already fall under a 25% tariff.
In its latest response, China allowed its currency Yuan to hit a 11-year low to make its exports more competitive in the face of the American onslaught. This was also a signal from Beijing that China is not ready to back down yet.
"Indeed, if tariffs go up to 25% for all imports from China for 4-6 months, it will heighten the risks to the cycle and the global economy could enter a recession in three quarters' time," Morgan Stanley's Chetan Ahya said. Three quarters from now would be early 2020, when the worst of the recession may strike the world.
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