This one key indicator suggests global economic growth is weakening

Chung Sung-Jun/Getty Images

Global growth in 2016 is not looking good if the amount of cargo being whizzed around the world in planes is an indicator.

According to the International Air Freight Association (IATA), global air freight volumes fell by 2.0% in March compared to a year earlier.

But the steep decline may in part be explained as a lag after port disruptions on the US west coast in early 2015 helped boost air cargo volumes during that period, which suggests the 2016 figures are not as serious as the numbers would suggest.

“Clearly, a lot of the weakness in the first quarter of 2016 relates to the temporary boost from the seaport disruption early-2015,” said David Oxley of IATA. “Year-on-year freight growth is likely to recover somewhat in the coming months as this factor drops out of the annual comparison.”

Despite that optimism, Oxley suggests that the underlying backdrop for air freight remains weak.

“2016 is shaping up to be another year of disappointing growth for air freight. Even if FTKs [air freight tonne kilometres] grow in line with their five-year average rate of around 1.5% over the rest of this year, given the poor start, overall volumes would still only expand by 0.6% in 2016 as a whole,” he said.

Helping to bolster that view, the new orders subindex in the JP Morgan-Markit global manufacturing PMI survey, released earlier this week, contracted for a second consecutive month in April, indicating that global demand for manufactured goods is weakening.

The chart below, supplied by IATA, measures changes in global air freight volumes against the Markit new orders index.

There’s clearly a strong relationship between the two, even forgiving the recent divergence due to one-off factors stemming from the US port strike in early 2015.

As a barometers of global economic activity — and perhaps more useful than trade figures as it is measured in weight and kilometres traveled, not dollar terms — it suggests that there’s a lack of momentum in the global economy at present, with risks slanted to the downside based on the current trend in this and other corresponding data.

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