After a strong September, the October Stifel Logistics Confidence Index slipped 0.4 points to 58.9. Overall, compared to October 2013, the index is 3.8 points higher and optimism remains good despite declines noted in sea freight for this month. In fact, the overall index has remained above the 50-level for twenty one consecutive months. Although still rather bumpy, improving economic conditions are driving much of the optimism.
Stifel Confidence Index: Total
The overall air freight logistics confidence index improved 0.8 points to 56.5. The current situation increased 0.4 points to 53.4. Trade lanes were mixed with declines noted on the Europe to Asia lane which fell 0.3 points to 51.3 and the Europe to Asia lane where a fall of 0.7 index points to 51.3 was noted. Meanwhile, the US to Europe lane noted the biggest increase of 3.2 points to 56.3.
The expected situation increased 1.2 points to 59.6, with the US to Europe lane again noting the biggest gain up 3.0 points to 57.7 while Asia to Europe, the only trade lane to record a decline, slipped 0.4 points to 63.8.
The latest IATA data for August indicates continued improvements in the global air freight market with volumes increasing 5.1% from August 2013. However, the organization noted that demand for air cargo is “growing more slowly than economic activity. Businesses are reported to have more confidence in the future but the list of political and economic risks continues to moderate how that confidence translates into actual activity.”
However, in the short-term, it is likely air freight volumes will remain positive through the end of the year thanks in part to new electronic product announcements and the upcoming holiday season.
Stifel Confidence Index: Air Freight
The overall Sea freight index declined 1.5 points to 61.2. The present situation declined 2.6 points to 57.7 with all but one lane declining. Europe to Asia, the only lane to show positive gains, was up 0.9 points to 59.2. Asia to Europe lane noted the biggest decline of 6.2 points to 60.3. While 60.3 still indicates strong growth, the sharp decline may be an indication of the still weak European economy despite showing good gains from the US on the air freight side.
The expected situation declined 0.4 points to 64.7. Lanes were mixed with Asia to Europe noting the biggest decline of 1.7 points to 67.5 and Europe to US with the biggest gain of 1.3 points to 64.8.
Perhaps some of the current hesitancy within the expected situation could be uncertainty surrounding the Maersk and MSC potential 2M alliance as well as Maersk’s recent announcement to invest $3bn over the next three years for new vessels. How both of these events will affect a market faced with over-capacity is still not certain and may have attributed to the overall slip.
Stifel Confidence Index: Sea Freight
In this month’s survey, we asked survey participants if they expect their supply chain to lengthen, shorten or remain the same over the next 12 months. Slightly over 50% indicated they expect supply chains to remain the same while 29.4% expect them to shorten and 20.2% to lengthen.
Several respondents noted the trend towards nearshoring and putting steps in to shorten their supply chains. Meanwhile, some survey respondents, particularly from the pharmaceutical industry, noted that as cold chain becomes more secure, it is becoming safer to source further away.
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