Wednesday, December 5, 2012

Are market developments in November a sign of things to come?

Despite increasing optimism in Asian manufacturing, Europe’s economic affliction persisted while the US manufacturing activity unexpectedly plunged in November. Although the holiday season is expected to provide some benefit to transportation and logistics providers, overall improvement in the market is not expected until perhaps sometime in 2013.

Asian manufacturing did prove to be a bright spot in November as new orders increased for several countries. Perhaps businesses are placing orders early to not only replenish inventory before Asian manufacturing closes for the New Year holiday but to also avoid rate increases that typically occur just prior to the holiday which is set for February 10, 2013. This increase in manufacturing will bode well for transportation and logistics providers over the next couple of months.

Europe’s fragile economic situation persists and weighs heavily on the region. Freight declines were noted across all modes – air, sea and road. Unfortunately, this is likely to continue until governments make the necessary adjustments.

With the Presidential election now decided, the US now faces increases in taxes and steep spending cuts beginning in January 2013 unless the US government takes steps to avoid this potential harmful situation. Perhaps the surprising steep decline in November manufacturing activity may be the result of this stalemate as businesses and consumers alike put off spending until a decision on this “fiscal cliff” is reached. Freight declines were noted for road while airfreight remained mixed. Cross-border activity also reported declines as uncertainty in the market persisted.

As the case in many economic downturns or uncertainty, the threat of strike usually increases as workers seek job protection. Such is the case with the current strike at the ports of Los Angeles and Long Beach which has now spilled into December. Freight diversions to Mexican ports and other west coast ports are occurring as a result. Another example is the Port of Portland, which although escaped a strike, a good bit of its tonnage was lost to other ports.  Finally, contract talks continue with unions concerning the east and gulf coast ports – deadline is December 31.

Overall, the global economy has seen little improvement in 2012. Sadly, 2013 does not look much better. With less than one month left in 2012, there still remains more questions than answers – When will Europe turn the corner? Will the US fall to recession if the “fiscal cliff” is not resolved? Can Asia continue its manufacturing improvement and lead the world out of this malaise as it did in 2009?

Additional insight into the global logistics and transportation market is provided in the latest edition of the Global Logistics Monitor. New this month are Ti’s Global Air Freight Index and Ti’s European Road Freight Index with data provided by Freightex.

The Global Logistics Monitor is a monthly review of the trends affecting the logistics and transportation market. Along with global and regional analysis, the report also includes charts from Ti’s Dashboard service. The report serves as a quick and easy reference for decision makers to monitor the changing market.