While the US stock market and economy continue to remain stubbornly immune to the ongoing trade war, the same can not be said for global trade as observed and measured by world freight shipping and volumes. According to the latest Goldman freight data, there has been a gradual slowing in global trade since 4Q17, and the July readings suggest an alarming continuation, and in some cases acceleration, of this trend.
The deceleration has closely tracked a tightening in global financial conditions, particularly evident in EM data, which in turn has largely been a manifestation of the ongoing escalation in trade tensions between the US and China.
Indeed, the implementation of the first round of US-China tariffs in early July may also have had an impact: US West Coast inbound port volumes were -1% in July (5% in 1H), while Chinese ports’ throughput growth slowed to 2% (6% in 1H), worse than implied by the close historical correlation with Chinese export orders. At the same time, air cargo growth at Europe’s key hubs turned negative (-2%) in July, with weakness cited on Asia-Europe. Looking forward, global manufacturing export orders in June/July were consistent with slightly positive, albeit slowing growth.
Breaking down freight by segment, here are some observations from a recent Goldman report:
Here is how global trade has slowed down recently in charts:
While freight volume growth remains steady c.3% in Sea, Air turned slightly negative in July for the first time in 2 years.
One of the factors cited for the slowdown in global manufacturing trade has been the tightening in financial conditions this year.
At the same time, even as the weaker Yuan has been supportive of East-West volumes…
… container rates have been on a declining path recently following capacity cuts.
Chinese port data was surprisingly weak in July
But it’s not just China, as Asian hubs have been generally weaker
Transit through the Suez Canal trade hub has also slowed sharply in July, up just 4% vs 10% in Q2
US port throughput has also been weaker, with LA/LB imports down in July
Meanwhile, inventories have been building in the EU as sales growth weakens
Due to declining transit and higher fuel prices, containership vessel speeds have continued to slow.
After hitting historic lows recently, the idle fleet of charter owners and liners is starting to rise again.
More concerning is that the global shipping orderbook as a % of the total fleet is at record lows.
Looking at air freight, while the US remains in expansion territory (+3% air crago growth in July, in line with Q2)…
… EU cargo growth continues to decelerate, and hit -2% in July, after -1% in June.
Likewise, EU air traffic growth – while healthy – has been slowing.