Reports have said a slowdown in trade volume in the first quarter of this year. Some shipping lines and logistics providers have failed to meet the first quarter’s target. The condition has forced BIMCO to revise its prediction of growth in head-haul and regional trades to end in the 1-2% range rather than the 3-4% that had been previously predicted. On the other hand, BIMCO has increased its demand growth forecast for 2024 by 2 pp and now expects growth of 5-6%.
Overall, BIMCO is basing its prediction on a gradual, but not full, return to the pre-COVID trend line based on the relationship between GDP and head-haul and regional trade volumes. Specifically, in the first half of 2023, we must expect a continuation of the business inventory adjustments that began in 2022 and caused head-haul and regional trade volumes to fall by 7.7% in the year’s second half.
Despite high inflation and increasing interest rates, retail sales volumes in the US and the EU have remained remarkably resilient. Retail sales adjusted for inflation have only fallen marginally compared to the peak during 2021/2022. In the US, they have fallen by 1.8% compared to the peak in April 2022, whereas retail sales in the EU are now 3.0% lower than in October 2021.
Although it has shown some recent improvement, consumer sentiment in both the EU and the US remains near all-time lows recorded during 2022. BIMCO believes that it may improve during 2023 if/when inflation recedes and interest rates peak and that this could fuel a rebound in container volumes.
Except for the Far East and North America regions, import head-haul and regional trade volumes into all regions ended 2022 lower than expected, considering the economic growth.
Taking the ongoing inventory adjustments, high inflation, and increases in interest rates into consideration, BIMCO has placed its baseline forecast 3%-5% lower than what it considers to be the maximum potential.
“Lower-than-predicted economic growth remains, along with continued high inflation, and interest rates are a key risk. The potential for increased reshoring and friendshoring are also risks. However, we find that any such shift would happen in smaller incremental steps rather than larger shifts that would have an immediate impact,” BIMCO said.
Read ISG Cover Story April 2023: https://theshippinggazette.com/responding-to-challenge-shift-in-logistics-business/
