Global air freight is falling in a sign of economic strain

Global air freight volumes are falling at some of the fastest rates since the end of the great recession in a warning sign that recessionary forces are building in the world economy.

Freight indicators are available with a much shorter lag than most macroeconomic statistics, which makes them a good barometer of the economy's health.

Air freight carries some of the highest-value cargo and reacts quickly to changes in demand, making it a good leading indicator for freight movements and the economy in general.

Freight volumes are now declining at major airports around the world in a signal the global manufacturing and distribution system is under growing stress.

Hong Kong International Airport, the busiest cargo hub in the world, reported volume down 7% for the three months between February and April compared with the same period a year earlier.

London's Heathrow Airport reported volume down by more than 3% over the same period, and growth rates have been sliding for almost two years.

In North America at Memphis International Airport, the busiest hub in the United States, volume was up by 1 percent in January-March, but that was a marked slowdown from 5% growth in May-July 2018.

Memphis reported continued growth in domestic freight shipments (+1%) but international freight fell (-1%), which is consistent with a relatively resilient domestic economy but weakness spreading from abroad.

Around the world, the sharpest slowdown is concentrated on routes to and from Asia, but other domestic and international routes also show slackening momentum.

"Conditions facing the industry remain challenging," according to the International Air Transport Association's latest monthly freight report. "The air freight segment continues to encounter various headwinds to growth."

"Growth (in air freight) is likely to remain subdued over the coming few months at least," IATA predicted, noting widespread weakness across the world's major exporting countries since the middle of 2018.

Air freight is very sensitive to small variations in economic growth, so it is hit hard by mid-cycle slowdowns as well as end-of-cycle recessions and distinguishing the two can be hard.

For the moment, the current slowdown is similar to previous mid-cycle slowdowns in 2015/16, 2012/13 and 2011/12, as well as the end-cycle recession of 2001/02.

But air freight movements confirm the global economy has lost significant momentum over the last year and the outlook is now poised delicately between growth and recession.