Air cargo was right to have strong expectations of future growth, according to Dr Gene Huang, chief economist of FedEx, who predicted it would continue to grow in line with trade growth, that is two to three times as fast as worldGDP growth.
The economist, who was ranked the second most accurate forecaster by the Wall Street Journal last year, said a combination of increased access to goods and also information was producing“explosive” growth in economic activities.“Transportation is the pulse of thatactivity, the way that the realisation ofvalue is facilitated,” he told delegates atthe TICA conference in Cologne.
“Trade deepening and global sourcing will continue, and as manufacturing processes become more and more fragmented, global sourcing will grow,” he said. Open skies, free trade and other liberalisation would also drive air cargo growth, along with the evolution towards lighter goods with more technology in them, which was a major economic trend.
On the immediate outlook for the global economy, Huang had a rosy perspective, despite signs of an adjustment in the US economy as its housing market slowed. He noted that each country in the JP Morgan purchasing managing index (PMI) was showinggrowth.
“The growth rate is slowing towards more sustainability, but that is a pretty healthy situation,” he said. “New orders are still growing, employment is growing, and prices are moving higher.
That is a pretty typical mid cycle picture. It is like being middle aged. Your bones are aching, but you are getting smarter and channelling your energy into the right place. But youstill expect more growth.”
He predicted that air freight would continue to grow faster than land or sea freight, with global manufacturing demanding fast cycle times. Before 1991, it showed explosive growth in whatever the business cycle. Then in a second phase from 1991 to 2000 its growth rate slowed to a more mature rate, but still faster than GDP growth. Finally, in 2001 it turned slightly negative, and had since followed the business cyclemore closely.
International cargo was earlier in that pattern, however, seeing explosive growth independent of business cycles pre-2001, and only at that point enteringinto a maturity phase.
Turning to China, where he had just had meetings with government offi cials, Huang noted that they were expecting 10.5 percent GDP growth and forecasting 10.8 percent growth per annum in air cargo, roughly in linewith the Boeing forecast.
“As I have noted, air cargo normally outstrips GDP growth, so I think those fi gures are conservative,” he told delegates. He added that the BRIC countries – Brazil, Russia, India and China – would dominate global growth going forward, while another eleven “motor” countries would support their growth – Bangladesh, Egypt, Indonesia, Iran, Korea, Mexico, Nigeria, Pakistan, the Philippines, Turkey and Vietnam. “So you can immediately see where the air cargo growth will come from,” he said.
Asked about predictions that the Chinese economy might overheat, Huang said that there were some structural issues it needed to address, such as local income disparities and an over-reliance in its economy on industry. “But economists have been talking about potential overheating in the Chinese economy for years, and we have not seen it yet,” he said.
He predicted that the Chinese government would soon start channelling some of its enormous foreign exchange reserves into projects to stimulate domestic economic growth, and he said this would see more imports into China from other parts of the world. “It is a pretty safe bet that the current trade imbalance will be alleviated in the next ten years,” he said. – Peter Conway
