According to Recession Watch, a new information service from Transport Intelligence (Ti), an indicator called Global Logistics Business Confidence Index shows that overall, despite the general economic gloom, respondents are still confident about the present state of the industry. However, when asked to describe their confidence in the economic prospects over the next 3 months, compared to the previous 3 months, the index falls dramatically. It then recovers slightly over a 12-month period, respondents overall believing there will be a small rebound in confidence.

The survey that produced the Global Logistics Business Confidence Index shows that there was a high degree of variation in sector confidence. It shows that Intermodal and Pharma logistics and developing markets, such as China and India, are also still good places to be doing business.

But now for the bad news. Airfreight volumes (FTKs) fell an unprecedented 22.6% in December 2008, compared to the same month the previous year according to IATA. The previous largest monthly fall (the greatest for some 30 years) was a 13.9% decline in September 2001 following the 9-11 terrorist attacks. Ti's own review of leading airports showed similar high falls, with the leading Asian airports being the hardest hit (particularly Shanghai).

In the sea freight sector, all major ports experienced a reduction in TEU throughput in January 2009 (compared with the same month in 2008). Once again the Asia Pacific ports were worst affected with Singapore and Hong Kong seeing a collapse in volumes by in the region of a fifth to a quarter.

Ti also conducted research on recession related developments within the logistics supply-side. The collapse of MFI, a UK furniture retailer, has put DHL Exel jobs at risk in the UK. Geodis has cut temporary staff in its automotive related operations and may go further. Vos Logistics is further reducing its truck fleet from 1,700 to 1,300 units. However in the US Expeditors reported strong profit growth, showing that companies can perform well in difficult market conditions. Meanwhile, FedEx has reduced the manning at its freight (trucking) business by about 900 people at 130 facilities due to a continued decline in consumer spending and overall industrial production.

As well as looking at a range of vertical sectors, Ti focused its research on the ailing automotive industry. Restructuring of businesses include extensive staff reductions globally, the closing of numerous production facilities and the cancellation of new models. A plan by the French government to subsidize French auto-makers at the expense of their Eastern European plants could lead to a retreat from low cost manufacturing strategies, and presents a risk to logistics companies which provide services to the region.

Developments in the automotive sector are affecting other sectors, which provide products to the car industry, including chemicals, textile and steel industries, amongst others.

In the high tech sector more than 240,000 jobs were lost in the sector during January, with more announcements being made during February. The month has also witnessed an element of retrenchment from poorly performing products, with companies concentrating on core lines. The slowdown has already seen the related high value air cargo and express sector take a major hit.

It seems that there is little end in sight to the global slowdown. Governments are struggling to get banks lending despite historically low interest rates. The 'credit crunch' has meant that manufacturers and retailers are finding it difficult to get finance to purchase goods, and consequently the wheels of international commerce have ground to a halt. However as Recession Watch has found, there are still glimmers of hope in the industry. People still need pharmaceutical and medical products; they continue to buy essential items for household consumption and fast food chains are doing a roaring trade. Opportunities exist for those logistics companies agile enough to take advantage of them.

Recession Watch, Ti's monthly analysis of the transport and logistics market, has 5 key components:
1. Ti's exclusive Monthly Confidence Index identifying the strongest and weakest logistics sectors
2. Vertical Sector Developments and their impact on the logistics industry
3. Special Focus: this month analyzing the automotive logistics sector
4. Major Logistics/Express Developments: which companies are cutting jobs, hubs, restructuring networks?
5. Monthly / Quarterly Indices: a round up of all the key logistics related indices

Recession Watch is available monthly, priced at £95. Please visit Transport Intelligence for more information or contact Mike Nordmann at [email protected], +44(0) 1666 511880.
Transport Intelligence