Further Decline: Stifel Logistics Confidence Index Falls to a Negative Market Outlook
26th October 2015
The Stifel Logistics Confidence Index fell into a fifth consecutive month of decline in October. Significantly, the index has now fallen beneath the neutral 50 point mark for the first time since January 2013, with confidence in both the sea freight and air freight markets plummeting. The Logistics Situation for air freight was especially bad, declining by 3.2 points to 45.7. The same trends that influenced last months decline are persisting, with weak emerging market growth, Chinas financial crisis, and the Chinese shift towards domestic consumption all influencing the trajectory of the index.
Whilst also demonstrating a month on month decline, the six-month outlook for both air and sea freight fell at a lessor rate than that recorded in the September Index, falling by 1.8 points. Nonetheless, the total was 10.4 points lower than at the same point last year, and 9.9 points lower than in October 2013. Sea freight was down more significantly than air, falling 2.1 points to 50.8. This total was 13.9 points lower than that recorded in October 2014. The shipping industry continues to be plagued by overcapacity, with Drewrys director of container shipping research stating that this crisis will worsen next year, adding, were it not for the recent fall in bunker prices, shipping lines would be losing money.
On the positive side of this months results, a noteworthy trend depicted within the Index was the encouraging performance of all shipments on routes from Europe to US. A growth trend was visible within both air and sea freight, and for the present and expected situations. It is arguable that the driving force behind this is the weaker valuation of the Euro, which has encouraged exports across the Atlantic. For example, Richard Grieveson of the Economist Intelligence Unit lent some weight to this assertion by stating that the US, non-Eurozone EU and Spain have been key in driving exports for Germany, even as the countrys industrial orders declined in August.
Air freight
Air freight volumes were flat in August, with a marginal FTK gain of 0.2% year on year, according to IATA. The organization noted a perceived pause in the downward trend of global trade volumes in explaining the reason for this respite. Within the survey results however, there was no such let-up in the decline, as indicated in the opening paragraph. All lanes were down for the month, with the exception of Europe to US, which was up by 1.9 points to 56.3. Europe to Asia noted the biggest fall, down 5.7 points to 39.0, followed by Asia to Europe, which decreased 4.9 points to 42.6. US to Europe declined 3.5 points to 46.1.
For the six month outlook, the expected situation index for total air freight also decreased, by 1.5 points to 52.7. Again, the Europe to US lane was the only one bucking the downward trend, gaining 2.6 points to 60.9. By contrast, US to Europe noted the greatest fall, declining 3.8 points to 49.0. Asia to Europe fell 2.4 points to 51.4, whilst Europe to Asia lost 2.1 points, amounting to 49.7.
Sea Freight
For the present situation, the sea freight index fell further beneath the neutral mark of 50, declining 2.9 points to 46.9. All lanes noted declines in October, with the exception of Europe to US, which rose 4.4 points to 52.0 for the month. This saw the lane rebound somewhat, after successive declines in August and September, though it remained beneath the previous years total for October. Amongst the other trade lanes, Asia to Europe noted the steepest decline, falling 7.0 points to 47.1. Meanwhile, Europe to Asia fell by 5.1 points to 43.6, and US to Europe lost 2.4 points to total 45.8.
The expected situation index for sea freight decreased 2.1 points to 50.8. Again, Europe to US grew, by 0.8 points to 56.7, meaning that this lane noted gains across the board. This was in stark contrast to the other lanes. The greatest decline was recorded in US to Europe, which fell 3.2 points to 46.9. Europe to Asia fell by 2.7 points to 49.8, whilst Asia to Europe noted a similar contraction of 2.6 points, amounting to 50.2.
One-Off Question
Each month, respondents to the Stifel Logistics Confidence Index survey are asked a unique, one-off question. The October one-off question was based around the impact of currency movements upon the re-shoring or near-shoring of manufacturing. Specifically, participants were asked whether or not the decline in the Euro versus other world currencies has made near-shoring or re-shoring more attractive. Whilst 36% of respondents believed that it has, the largest response group was unsure, with 40% of the sample selecting this option. The remaining 24% thought that that the Euros decline did not make re-shoring or near-shoring more attractive.