The escalating trade war between the US and China has accelerated the synchronized global downturn. Global exports continue to collapse, and the global Purchasing Managers Index (PMI) remains under 50, stuck in contraction territory. All of these ominous signals indicate a global trade recession could be imminent in 2020.
New data from the International Air Transport Association (IATA) shows global air freight volumes, measured in freight tonne kilometers (FTKs), plunged 3.9% in August YoY, and this was the tenth consecutive month of contraction and the most extended decline since the 2008 financial crisis.
Global trade volumes are quickly slowing, down over 1% from a year ago.
Trade across the world could be at a standstill by 2H20. Air cargo volumes have been hit with tremendous macroeconomic headwinds from a global slowdown that started in late 2017. An intensifying trade war between the US and China has undoubtedly accelerated the global downturn, damaging emerging markets that are highly exposed to exports, like Europe, India, and many countries in Asia.
"The impact of the US-China trade war on air freight volumes was the clearest yet in August. Year-on-year demand fell by 3.9%. Not since the global financial crisis in 2008 has demand fallen for ten consecutive months. This is deeply concerning. And with no signs of a détente on trade, we can expect the tough business environment for air cargo to continue. Trade generates prosperity. Trade wars don't. That's something governments should not forget," said Alexandre de Juniac, IATA's Director General and CEO.
Plunging air freight volumes across the world is troubling because the industry is viewed as a bellwether indicator of the health of the global economy.
A regional view of air freight volumes shows Asia-Pacific and the Middle East experienced the sharpest declines in YoY growth in August. North America and Europe saw moderate decreases. Surprisingly, Africa and Latin America recorded an increase in air freight volume in August YoY.
Earlier this week, IMF's new head, Kristalina Georgieva, said the monetary fund would again cut its global growth forecast both 2019 and 2020; as a reminder back in July, the IMF again cut its projection for 2019 GDP growth to 3.2% this year and 3.5% next year, its fourth downgrade since last October, and the lowest since the financial crisis amid ever-escalating trade war.
Investors should prepare for severe turbulence ahead, as it's quite evident the global economy is entering the worst slowdown since the 2008 financial crisis.