Over H1 2019, the global contract logistics market grew 4.0% in real terms year-on-year. This signifies a slowdown from the decade-high growth rates seen in recent years.
Based on Ti’s research of leading contract logistics providers, the consumer & retail and manufacturing sectors account for similarly high shares of the overall market and the performances of these sectors therefore provides an indication of how the market is performing. OECD figures show that across member states, manufacturing output has been weak – industrial production growth was 0.2% year-on-year in H1 2019, down from 2.3% in 2018. Total retail trade volume growth was 1.6% year-on-year in H1 2019, down from 2.0% in 2018.
The nature of the market, with contract lengths that are typically three to five years, means there is a resistive nature to downturns in the global economy. Having these longer term contracts means companies are somewhat immunized from short term shocks. This in part has allowed the market to achieve robust growth despite an increasingly worrying economic slowdown.
Global growth is being driven by Asia Pacific. In the first half of 2019, the region grew by 7.6% year-on-year, steered by double digit growth rates in China, India and Indonesia. The contract logistics market in China was driven by continued expansion in its manufacturing and retail sectors, despite mounting headwinds in the Chinese economy. Research by eMarketer suggests that China will overtake the US as the largest retail market by the end of 2019, primarily due to the rapid growth of e-commerce and rising spend in lower tier cities. This continued expansion is pushing the need for well-developed, outsourced logistics functions.
On the other hand, Europe dragged down the global market, with the slowest growth rate out of any region. The market was weighed down by the underperforming economies of the major countries in the region. It was particularly affected by the slowdown in Germany, where economic growth is close to zero. Its manufacturing sector contracted and was badly affected by the slowdown in the automotive industry.
Given the challenges facing the global economy and how the market has performed so far, Ti has revised down its previous projections for market growth in 2019. Trade uncertainty and weakness in manufacturing are likely to continue to play a part in shaping growth over the rest of the year.
Source: Transport Intelligence, October 23, 2019
Author: Sergio Korchoff
Ti’s contract logistics Mid-Year Market Sizing data includes H1 growth rates and 2019 growth rate projections for 23 countries, 7 regions and the world. Similar data is available for the Freight Forwarding, Express and Small Parcels and European Road Freight markets.