EU Logistics Pressure Matrix
Sind Sie bereit, mit Flexport zu starten?
Setzen Sie auf digitale Logistikprozesse und registrieren Sie sich hier.
EU Logistics Pressure Matrix Shows Steady Shipments, Falling Rates
The Flexport EU Logistics Pressure Matrix is currently not being updated. The last update was October 18,2022.
Flexport’s EU Logistics Pressure Matrix (LPM) gathers eight data points in an attempt to provide a picture of the challenges facing logistics networks from the demand side and a view of ongoing activity on US-inbound routes. In the latest update, we find that EU import activity has remained above year-earlier levels, on an inflation-adjusted basis, but is only inline with levels seen year-to-date. Shipping rates have continued to decline, while ocean timeliness has worsened.
You can now receive the Weekly Economic Report for insights into global economic data, trade activity, industrial decision-making and government policy – delivered to your inbox every Monday – by signing up here.
The Methodology: The Flexport EU Logistics Pressure Matrix (LPM) brings together eight data points clustered into two groups: demand measures covering consumers and industry; and activity measures which show the state of logistics networks. The measures are US-centric and mix a variety of weekly and monthly measures. The LPM is updated every Tuesday with the latest data points from the prior seven days. More details on the measures and the reasons for their inclusion can be found in our in-depth explainer published June 28, 2022.
Week to October 18, 2022 Key updates in the past week include:
EU imports, adjusted for import price inflation, have increased by 21.5% year over year in August. Yet, the absolute level of activity has been more-or-less constant during 2022, suggesting incremental pressure on logistics may be lessening.
The continued downturn in container shipping rates has left them 33% below their peak, though they remain 3.8x their pre-pandemic level. The first stage of Flexport’s Ocean Timeliness Indicator – cargo-ready to origin port departure – has gotten worse in recent weeks, potentially reflecting the strike-related bottlenecks in Europe.
The Logistics Pressure Matrix is colorized in 10 grades from red (measure represents high pressure on logistics networks) to green (low pressure) relative to the period from January 2019 to date. So, falling retail sales tends to be “green” as it represents reducing demand pressure on logistics networks while a high level of deflated imports would be “red” in indicating elevated flows.
The matrix above shows the sentiment indicators, which provide a guide to future behavior, suggest less pressure on networks, though retail sales have yet to drop to pre-pandemic levels and inventories are still not fully refilled.
On the activity side the deflated trade activity, which includes non-containerized sea-freight and air-freight, is steadily returning to pre-pandemic levels, suggesting reduced pressure. Yet, shipping rates remain elevated and logistics timeliness remains worse than the pre-pandemic period.
Consumer and Industrial Confidence (Updated September 29, 2022): Consumer confidence in the EU has worsened in September. At -29.9 in August (10–year average -9.9) the reading was the worst since the survey began in 1985 after declining in 11 of the past 12 months.
The longer-term slide likely reflects the inflationary concerns flagged above as well as uncertainties caused by the conflict in Ukraine. Lower consumer confidence portends lower spending and hence reduced pressure on logistics networks.
Industrial confidence has also been shaken by the supply chain disruptions resulting from the conflict which have added to earlier complications caused by a shortage of components. Rising producer prices and concerns about further consumer price hikes in the face of ECB tightening have driven the IFO index of German manufacturing sentiment to -37.9 in September versus a 10-year average of +2.7.
That was the worst since April 2020. Lower manufacturing confidence may be a sign that firms are planning to reduce manufacturing activity and hence less demand both for imported components and export sales - in turn cutting the need for logistics services.
Retail Trade Activity (Updated October 11, 2022): EU retail sales, like those in the U.S., expanded rapidly during the pandemic in response to diverted consumer spending from services and a desire to improve home living conditions.
Retail sales inched 0.1% higher in August 2022, excluding food, versus July in real (i.e. inflation adjusted) terms. Sales were, nonetheless, 2.3% below the same period a year earlier. Online sales (the green line in the chart above) fell by 3.2% sequentially and 4.6% year over year.
While providing signs of a decline from recent peaks, total sales are still 8.5% above the same period of 2019 while online sales are 32.1% higher. Broadly speaking, a significant decline in real retail sales on a seasonally adjusted basis in the order of 5% or more below pre-pandemic levels will be needed to reduce pressure on logistics networks.
Stocks of Finished Goods (Updated September 29, 2022): There is not a readily available source of inventory data equivalent to that used in the U.S. Logistics Pressure Matrix, so instead we track corporate assessments of finished goods availability. The chart above shows a balanced diffusion index where zero indicates “sufficient” wholesale inventories and a figure below zero indicates a shortfall.
The black line for the EU-27 overall shows a reading of +4.4 in September, which compares to a trough of -6.6 in October 2021 and is just below August’s +4.9. The latter was the highest positive balance (i.e. inventories above sufficient) since September 2020.
There’s a marked difference by country which largely reflects the relative importance of capital and consumer goods. Inventories in the Netherlands, which reflects commercial and consumer goods, have remained in sufficient territory. Capital-goods-centric Germany has broken back into positive territory and is at its highest since November 2020.
An inventory assessment at or above zero indicates a need for reduced imports and hence reduced pressure on logistics networks to carry inventory-rebuilding stocks.
Deflated Trade (Updated October 14, 2022): One way to access underlying trade activity is to take the nominal value of merchandise trade and deflate it by the import prices element of PPI. In the case of the EU-27 the nominal value of imports climbed by 56.4% year over year in August. Once deflated by import price inflation, the real value of imports rose by a still-substantial 21.5% on a year over year basis.
Nonetheless, the volume of imports, shown by the blue line in the chart above, is close to the average seen since the start of the year. That may indicate a lessening of pressure on logistics networks. It should also be noted that these figures include shipments of break-bulk cargo (e.g., autos), commodities (including oil, metals and agricultural products) and airfreight as well as containerized sea freight.
China-to-Europe Shipping Rates (Updated October 14, 2022): Container shipping rates from China to Europe, including both Northern Europe and Mediterranean ports, fell by 6.5% after Golden Week, on a four-week trailing average basis. That marked a 14th straight decline and left rates at their lowest since June 2021.
While that’s also put rates 33.2% below their February peak, they are nonetheless still 3.8x their levels of January 2019, suggesting market prices still include fundamentally different expectations for services demand and availability of vessels compared to the pre-pandemic period.
Ocean Freight Handling Times (Updated October 16, 2022): Flexport’s Ocean Timeliness Indicator for Far East Westbound (FEWB) routes, increased for a fourth straight week. That left the measure at its highest since July 24, 2022. The knock-on effect of strike-related bottlenecks in Europe may be to blame for the recent deterioration. Conditions are, nonetheless, still 38% better than their worst from February 2022.
Air Freight Handling Times (Updated October 16, 2022): Flexport’s Air Timeliness Indicator for Far East Westbound (FEWB) routes for air freight from consolidation in Asia to final delivery in Europe was unchanged at 9.6 days in the four weeks to October 16.
That left the measure at the highest since early July for a fourth straight week. It is, nonetheless, well down from the January peak of 12 days. Some caution is needed with regards to seasonality. Historically, timeliness has improved over the summer before increasing the fall.
Disclaimer: The contents of this report are made available for informational purposes only and should not be relied upon for any legal, business, or financial decisions. Flexport does not guarantee, represent, or warrant any of the contents of this report because they are based on our current beliefs, expectations, and assumptions, about which there can be no assurance due to various anticipated and unanticipated events that may occur. This report has been prepared to the best of our knowledge and research; however, the information presented herein may not reflect the most current regulatory or industry developments. Neither Flexport nor its advisors or affiliates shall be liable for any losses that arise in any way due to the reliance on the contents contained in this report.
More From Flexport
Four Winning Strategies for a Successful Transpacific Ocean Freight RFP Season 2023
Ocean Timeliness Indicator
Air Timeliness Indicator