The one dominant theme for markets so far in 2016 has been concern about the outlook for global growth.
Persistent weakness in Chinese data, along with recent weakness in some leading US indicators, has weighed heavily on sentiment. Stocks have been savaged, commodities crunched. It’s been a very ugly, and largely unprecedented, start to 2016.
In what will no doubt add to concerns, there is growing evidence that this year, like many before it, will see global growth undershoot already tepid expectations.
As this chart shows, perhaps those heightened fears are warranted.
From the International Air Transport Association (IATA) it shows the recent trend in international air passenger travel.
Since the depths of the global financial crisis in early 2009, passenger numbers have been steadily increasing, pushing aside weak global economic conditions, the onset of the European debt crisis and several health pandemics such as avian flu and Ebola outbreaks.
However, as you can see in clearly in the chart, passenger growth – both for economy and premium seats – now appears to be rolling over, hinting that not all is well with the global growth at present.
Based on its analysis, IATA believe the unusual development is due to weakness in one region in particular – Asia.
“Over the past few months, we have seen weakness on the Within Far East market, which suggests that adverse economic developments in parts of Asia have started to place downward pressure on air travel demand,” wrote IATA in its November Premium Traffic Monitor report.
“In addition, in November we saw weak performance on the Europe – Far East market, which was a key contributor to the overall slowdown. Whilst some of the November result can be attributed to the strikes at Lufthansa, further slowdown in the Chinese economy has raised concerns that the weakness in Asia is causing the broader decline in international passenger numbers over the past few months.”
While industrial action may have contributed to the recent slowdown, it’s not as if the airline industry hasn’t had similar events, or worse, thrown at it over the past seven years. It has, and despite this, international air travel has continued to flourish.
Although this is just one indicator, and not a widely cited one at that, the recent development is unusual given the trend seen in recent years.
If due to factors other than industrial action, it adds to the case that global growth may be slowing, and suggests recent market ructions may be a sign of things to come.