As 2024 comes to a close, it’s a good time to reflect on the global logistics demand environment. What does it look like, and is it what we all expected?
The answer? Yes, but in some areas, No.
Using GDP as our basic indicator, the IMF’s expected global growth for 2024 increased by 0.3 percentage points from 2.9% in their October 2023 forecast to 3.2% in their October 2024 forecast. This changes the situation from a big drop in global output (down from 3.3% in 2023) to just a small drop.
This upgrade is thanks largely to a healthy improvement for North America, from an expected 1.5% in the IMF’s October 2023 forecast to 2.5% in their October 2024 forecast. The expectation for the Asia-Pacific region improved from 4.1% to 4.5% in the same time period, and Europe improved from 1.4% to 1.6%.
Yet the question remains: how much did this basic measure of GDP translate into growing demand for logistics? The question isn’t so simple. The AI boom is adding a lot of noise to these numbers as tech sectors around the world grow intensely. The spending power of global consumers remains weakened, and many production sectors around the world are still in the process of cutting output, whether in response to weak demand or due to reduced international competitiveness in the face of escalated production costs.
Ti’s numbers show that GDP growth provides some reliable but loose evidence toward growing demand for global logistics services. However, the story is nuanced by the complex and varied states of major economies around the world.
Reduced inflation has definitely unshackled the global logistics market from its depressing trend. Ti’s Sea Port and Airport volume indexes show a broad recovery in international trade volumes. As consumers see less pressure to reduce their outgoings and dare to spend once again, they may still be unable to splurge, but this is a start, and it’s resulting in growing demand for international trade.
The areas of complexity arise when we consider the demand for goods in other areas, however. Generally, Production PMIs around the world remain in contraction territory or are seeing very little growth, and weakened consumer spending power is supporting little retail volume growth.
How can we identify the true picture?
We can see evidence of the true demand for goods in the US market. Over the previous two years, we have consistently looked at surprisingly positive numbers emanating from the US economy, whilst the European situation looked consistently dismal. However, US logistics markets are showing signs of only low and steady growth. Why? Because non-service sector growth remains low. Official figures suggest a -1.1% fall in the volume of retail goods traded and a -0.5% fall in industrial output for 2024. As a result, logistics growth has remained muted, especially in domestic operations such as road freight, contract logistics, and warehousing. A similar European story is Poland, which has been an example of a European success story, but looking at non-service sector demand growth, we can see that inflation, (which has increased to 5.0% in October from 2.0% in March), has caused a -0.9% fall in retail volumes, while the German economy’s infectious woes have limited industrial output growth to just +0.1%.
There are some success stories, however. Spain continues to be the sole champion of strong growth in a major European economy as improved international competitiveness facilitated both retail (+1.3%) and production (+0.3%) activity growth. Both, however, lag behind their improved GDP forecast of 2.9% in 2024. This suggests demand growth for physical goods is lagging behind service sector and overall economic growth. In addition, China continues to struggle, but structural resilience and government spending have supported 5.3% annual production output growth in October 2024, ahead of the expected economic growth.
In Conclusion:
Economic growth has trended on the more positive side across the world, with many slight upward adjustments for economic growth compared to the expectations at the end of 2023. In Europe, however, the recovery is dragging out, and there are multiple examples of worse 2024 growth than expected this time last year. On a global level, more in-depth research shows we are still in an early and fragile stage of improving logistics demand, and the demand for goods movement is still yet to really kick off.
Ti has crunched the numbers to identify 2024 H1 growth and forecasted growth in 2024, 2025, and into 2028 in contract logistics, freight forwarding (air + sea), express, and road freight in over 25 countries around the world. Visit https://www.ti-insight.com/ or contact us to get your hands on the insights.
Source: Transport Intelligence
Author: Nathaniel Donaldson
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