According to Ti’s upcoming report, Global Contract Logistics 2016, the global contract logistics market expanded by 3.8% in real terms in 2015, down from 4.4% the previous year.
According to the IMF, global economic growth in advanced economies was 2.0% in 2015 (2014: 1.8%), while emerging market and developing economies saw their economic growth contract to 4.0% (2014: 4.6%). This story somewhat resembled the experience of the contract logistics market: growth in advanced economies held up reasonably well whereas emerging markets growth suffered, but in fact by more than the GDP growth number above would suggest.
There was also a notable exception to the story for advanced economies, as the US contract logistics market is thought to have decelerated in 2015 due to weaker retail sales and industrial production growth.
It must be said however that the US contraction in percentage point terms was far lower compared to most emerging markets, who were battered by a cocktail of headwinds. China, which accounts for a major proportion of emerging markets contract logistics by itself, is enduring a well-documented slowdown. The price of oil and other commodities plunged in 2015, disproportionately hurting a number of major emerging markets across the world, with Latin America, CIS and Middle East chief among the sufferers. Such sharp declines, through their knock-on effects, take the steam out of sectors which really matter to contract logistics, such as retail and industry. On top of that, the likes of Brazil and Russia are enduring their own specific problems: the former is mired in stagflation and a government corruption scandal, while the latter has been hurt by Western sanctions.
It is important not to get carried away though. Both Western Europe and the US had real contract logistics growth of approximately 2% in 2015, and economists seem increasingly worried that Europe and Japan are mired in low growth traps (‘secular stagnation’) for the foreseeable future. Growth in most emerging markets comfortably exceeded 2%, save for Brazil, Russia and a few others devastated by the commodities plunge. In Asia Pacific, many markets had contract logistics growth close to or in double-digits, including the major markets of China and India. Moreover, the medium term outlook for emerging markets is far better.
David Buckby, Economist at Ti, commented, “Overall, 2015 was a year where there wasn’t a great deal of change in developed contract logistics markets. What the world really noticed was the weakness in emerging markets. This is by no means a call to ‘give up’ on emerging markets, forecasts for 2016 and beyond are more optimistic. Rather, it is that logistics providers should perhaps pause for thought a bit more before ramping up investment in certain locations.”
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Source: Transport Intelligence, 25th April 2016
Author: David Buckby
