According to the IMF, the global economy continues to face steep challenges. The anticipated 2023 slowdown will affect many economies, with countries accounting for one-third of the global economy poised to contract in 2023. The global logistics sector will not evade the downturn.
According to Bloomberg Intelligence’s 2023 outlook for North American truck and rail companies, boom times are coming to an end as cooling economic activity and demand are expected to dent growth in 2023. According to accountancy firm BDO this week, mergers and acquisitions in the UK logistics sector have declined for the third successive quarter amid fragile market conditions.
FedEx Freight confirmed last week that it is bringing in furloughs in some US markets. The move is due to ‘current business conditions impacting volumes’. Parent company FedEx has been cutting costs in anticipation of reduced demand for the next several quarters. FedEx reported that US deliveries were down by around 10% in the three months from June to August 2022 compared with a year earlier.
Also, this week, Amazon is reported to be planning the largest layoff in company history, cutting around 10,000 jobs. The job cuts will mostly be from its devices business, but the company is also planning major cuts to its retail division. Amazon has recently scaled back its logistics operations in recent months, delaying or closing more than 60 warehouses. This may have a knock-on effect on Amazon Freight, a third-party logistics operation that in the UK and Europe runs a network of 6,500 trailers and 13,000 carrier partners.
Shipping container platform Container xChange reported this week that recession and excess inventory has seen shipping prices fall and ports are now clogged with empty containers. The company blamed a decline in consumption at a time when retailers have an excess of inventory. Container freight volumes at the largest US ports were down 3.8% in September 2022 compared to the same month in 2021. The total volume of loaded containers handled by nine major ports amounted to 2.67m TEUs in September 2022, down from 2.77m in September 2021 and 2.85m in September 2020.
Global air freight traffic fell 10.6% year on year in September 2022, causing a corresponding reduction in freight rates. The September figures published by the International Air Transport Association (IATA) confirm that the slowdown in air freight activity is continuing. Global air freight volumes were down 10.6% on their September 2021 total at 20.33bn ton-kilometres overall and 10.6% down, too, in the purely international sector.
In October, DSV, a leading freight forwarder, reported a ‘reduced growth rate’ for its airfreight business in the third quarter as rates declined and consumer demand dropped amid economic uncertainty. Also in November, DPDHL reported that global demand for freight has started to slip and ‘there is no longer any doubt that the world economy is facing difficult times’. Freight volumes fell 12% in DHL Global Forwarding’s air freight business in the third quarter, while sea freight volumes were down 9%.
It is clear that we are entering a period of economic slowdown, with headcount and assets being trimmed to match demand. Those companies with flexible business models will no doubt fare better than most. How long the economic malaise will last remains to be seen.
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