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Economy predictions trend upward

By John W. McCurry on January 31, 2014

Will 2014 be the year that the fortunes of the airfreight sector finally change for the better? If the barrage of annual economic reports released during January can be believed, there appears to be reason for optimism.

Industry veterans often say an improved U.S. economy is a harbinger of better times for the industry as a whole. Here are some recent upward signs:

PricewaterhouseCoopers’ annual CEO survey found that twice as many CEOs around the world as the previous year believe that the global economy will improve in the next year, and 39 percent say they are “very confident” their company's revenues will grow in 2014.

PwC says 44 percent of responding CEOs see the global economy improving over the next year, up sharply from 18 percent the year before. Only 7 percent predict the global economy will decline, down from 28 percent in 2013.

There is also good news on the manufacturing front. The U.S. Federal Reserve, in its year-end report, said all 12 of its districts had steady growth in manufacturing. All but the Reserve’s Kansas City District reported growing sales and an optimistic outlook. A manufacturer in the Dallas District said that for the first time since before the recession, his firm had too many jobs to bid on.

Specifically, the Reserve said three areas of manufacturing were especially strong: aviation, autos and construction materials. The Boston, Chicago and San Francisco Districts reported exceptional strength in commercial aviation driven by record backlogs at major aircraft producers. The Boston, Cleveland, Atlanta and Chicago Districts reported above-average strength in the auto industry.

Overall, the Reserve report said employment was described as steady with few reports of plant closings. There were some concerns about health care cost inflation. Capital spending was generally up with further growth expected.

News about semiconductors, usually viewed as a key barometer for airfreight, was mixed, with contacts in the Boston District citing strong demand for semiconductor manufacturing equipment and contacts in the San Francisco District reporting gradually increasing sales of chips.

The Semiconductor Industry Association was more positive, reporting that sales grew for nine consecutive months through November 2013.

Three key economic indicators from the Gallup organization – the Economic Confidence Index, the Job Creation Index and average consumer spending – all improved in 2013.

The International Energy Agency reported in late January that an improving U.S. economy boosted oil demand for the last quarter of 2013. The IEA expects global demand this year to exceed previous projections.

The U.N., in its World Economic Situation report for 2014, said the global economy is expected to grow at a pace of 3 percent in 2014 and 3.3 percent in 2015, compared with an estimated growth of 2.1 percent for 2013.

The world economy experienced subdued growth for a second year in 2013, but some improvements in the last quarter led to the U.N.’s more positive forecast. The euro zone has finally ended a protracted recession.

Growth in the U.S. strengthened somewhat. A few large emerging economies, including China and India, managed to backstop the deceleration they experienced in the past two years and veered upwards moderately. These factors point to increasing global growth, according to the U.N.

All of these early-year reports are encouraging. Whether they translate to improved conditions for the ever-changing airfreight landscape remains to be seen.

John W. McCurry is the editor of Air Cargo World.

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