2010 Could See Normal Levels of Freight Volumes
“Financial conditions in the mature markets are projected to improve only slowly, as insolvency concerns are diminished by greater clarity over losses on bad assets and injections of public capital, and counterparty risks and market volatility are reduced.” –IMF Chief Economist Olivier Blanchard
There are two ways to view the International Monetary Fund’s World Economic Outlook released yesterday in terms of freight.
One takes a decidedly gloomy view, as the IMF predicting global economic output to decline by 1.3 percent in 2009 – with “advanced economies” forecast to contract by 3.8 percent and the U.S. economy shrinking by 2.8 percent. Economic recovery should begin until 2010, but at a estimated 1.9 percent, it would be sluggish relative to past recoveries, noted Olivier Blanchard, the IMF’s chief economist.
“While the rate of contraction should moderate from the second quarter of 2009 onward, output per capita is projected to decline in countries representing three-quarters of the global economy,” he said at a press conference yesterday.
“The world economy was being battered by competing crosscurrents, with the collapse in confidence and demand continuing to pull the economy down and government stimulus measures and natural stabilization mechanisms pulling the economy up,” he added. “This is not the time for complacency, and the need for strong policies, both on the macro and especially on the financial fronts, is as acute as ever.”
From that perspective, freight volumes – both on a global basis and within the U.S. – are going to stay in the cellar for a long stretch here. When economic activity is negative on this scale – as it is now – freight simply evaporates, and we’ve got two and half quarters to go of an environment like this.
The second way to look at things, though, is to take a more positive view – one that Blanchard himself espoused at the IMF’s press conference yesterday. “There is light at the end of this long tunnel,” he said. “World growth can turn positive by the end of this year, and unemployment can start decreasing by the end of next year.”
Blanchard said he could see the balance shifting towards the end of this year, with growth in advanced countries becoming positive again in 2010, then returning to their normal level around the end of 2010. Unemployment should crest only toward the end of 2010, however, and should decrease after that.
The IMF’s outlook also noted that emerging and developing economies should still see positive growth this year of 1.6 percent, bouncing back to 4.0 percent next year. Sub-Saharan Africa will remain in positive territory at 1.7 percent in 2009, recovering to 3.9 percent next year. That activity should, in turn, fuel international trade and thus global freight volumes – potentially giving a lift to U.S. freight volumes as well.
Probably the best news is that the worst is most likely behind us. The IMF reported that advanced economies (that includes the U.S.) experienced an unprecedented 7½ percent decline in real GDP during the fourth quarter of last year, with output estimated to fall almost as fast during the first quarter of 2009.
[source - fleetowner.com]
