Slower growth in Logistics Confidence Index for August

The growth rate of the Stifel Logistics Confidence Index slowed for the month of August. Compiled by Transport Intelligence, the overall index, which combines the current situation with future expectations, increased 0.3 points from 52.1 in July to 52.4 in August. Still, this is the seventh consecutive month the index registered above the 50 threshold, indicating slow but improving conditions in the overall European freight forwarding market.

The airfreight market continues to show improvements; albeit these improvements are based on easy comparisons from 2012 when the market was still in steep decline. This is supported by IATA’s June data which indicates European airlines may have turned a corner. From May to June, global freight volumes increased by 0.8%. A quarter of that improvement was because of European airlines which saw a 0.9% improvement in demand compared to May, and 2.6% increase compared to June 2012.

The Logistics Confidence index suggests optimism has increased among European freight forwarders in regards to the next six months for airfreight, in particular those lanes (Asia and US) to Europe. This may indicate the overall European economy is indeed picking up as businesses and consumers possibly begin to increase spending.

While the overall sea freight index noted a 0.3 rise to 54.5, the present situation, however, noted declines in sentiment for all but one lane (Asia to Europe). This may be due to the increase in rates ocean vessels recently implemented. The outlook for the next six months was much more positive, indicating perhaps a brighter holiday season. The Europe-US tradelanes, in particular, recorded the strongest gains.

As improvements continue, we looked at one situation in particular which could hinder growth in this month’s unique question. We asked survey participants if they believe the latest conflict in Egypt will disrupt trade flow through the Suez Canal. 41.9% indicated they did not believe conflict would disrupt flow through the Suez Canal, while 36.0% said it would (22.1% were unsure). Comments included “At worst only temporarily. Canal revenues are critical to Egypt and the military will spare no effort to keep it flowing” and “Important sea route with a lot of traffic. These conflicts, being unpredictable in nature, may demand the search for new routes.” Indeed, just this past week, Cosco began its first journey from Dalian to Europe via the Northeast Passage. This route is expected to cut times by 12 to 15 days versus the traditional route through the Suez Canal. However, currently the Northeast Passage is only navigable for about four months out of the year.

The Logistics Confidence Index shows the outlook for the next six months is positive, jumping 0.6 points to 58.6 for August. European freight forwarders appear to be expecting improving market conditions and increases in volumes.

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About the Stifel Logistics Confidence Index

To get a better view of global air and ocean trade, Stifel has partnered with Transport Intelligence to create the Stifel Logistics Confidence Index (LCI), a monthly survey of international shippers and forwarders that measures freight activity across several European-based trade lanes.