Global manufacturing activity and freight are showing signs of a recovery, after a downturn took hold in the second half of 2022 and lasted for most of 2023, which could support petroleum consumption and prices later in 2024.

But indicators from the United States have been more mixed and manufacturers there may struggle until the central bank starts to cut interest rates to stimulate consumption of expensive durable items.

Global industrial output was up by 1.6% in the three months between February and April 2024 compared with the same period a year earlier, according to the Netherlands Bureau of Economic Policy Analysis (CPB).

Industrial activity has been increasing relatively slowly but steadily since the fourth quarter of 2023 steadying commodity prices (“World trade monitor”, CPB, June 25, 2024).

Global freight has also started to rise with volumes up by 0.9% between February and April 2024 compared with the same period a year ago.

Freight volumes are rising at the fastest rate since the onset of the downturn in late 2022, though growth is weak compared with the previous three decades.

In Asia, freight has rised more strongly. Containers handled through the port of Singapore reached a record 16.9 million twenty-foot equivalent units between January and May 2024 from 15.7 million TEUs a year earlier.

South Korea’s KOSPI-100 equity index, which is heavily weighted towards export-oriented manufacturing businesses, has risen to 30-month highs as the trade cycle turns upward.

Even in Japan, Narita International Airport reported seasonal air cargo increased in April for the first time in more than two years.

At the other end of Eurasia, London’s Heathrow Airport handled a record 0.62 million tonnes of air cargo in the first five months of the year, the highest since before the pandemic in 2019.

The picture in the United States is much more mixed, with strong growth in container freight through ports, but softness in internal freight by rail and road.

The top nine U.S. container ports handled almost 11 million TEUs in the first four months of the year up from less than 10 million TEUs a year ago.

The number of shipping containers hauled by the major railroads has grown at around 10% from prior-year levels though there are signs the rebound has stalled since the start of 2024.

By contrast, road freight has continued to decline albeit more slowly than in 2023. The continued downturn in trucking likely explains why consumption of diesel has been surprisingly weak in late 2023 and early 2024.

The strength of the dollar against other major currencies is likely encouraging imports while high interest rates dampen demand for expensive durable items manufactured at home.

Both U.S. manufacturing production and new orders for non-defence capital goods excluding volatile transportation items, a proxy for business investment, have been flat over the last year.

The recovery is proving much slower and more patchy than anticipated at the start of the year, weighing on diesel consumption and oil prices.

https://www.marinelink.com/news/global-freight-rises-shows-signs-weakness-514776