Robust Economic Growth Underpins Bullish Boxship Outlook

CONTINUED improvements in the economic performance of key regions such as the US and Europe bode well for the container shipping industry.

News ID: 78627

Date: 22 February 2018 - 10:23

According to MANA, This is indicated in the International Monetary Fund’s World Economic Outlook for January 2018, where it revised its global growth forecast in 2018 and 2019 to 3.9% for each year from 3.7% before.

BIMCO chief analyst Peter Sand notes in a report that the outcome is mainly due to better than expected growth from advanced economies, with the IMF now forecasting gross domestic product for these economies to grow by 2.3% in 2018 and 2.2% in 2019 from 2% and 1.8% previously.

“This is the highest upward cumulative revision for advanced economies since January 2010, when we saw a false dawn for an improvement in the global economy. If this growth materialises, it will be highly beneficial for the container shipping industry, as growth in advanced economies generates the highest trade-to-GDP multiplier.”

The strong growth seen in the US and Europe has led the IMF to keep its forecasts for emerging markets and developing nations of 4.9% growth in 2019 and 5% in 2019.

Mr Sand says that as long-term global growth is expected to increase only moderately over the next few years, nations have to carry out structural reforms to bring out more growth, thus supporting productivity and lifting medium and long-term derived demand for shipping.

Europe continues to see a strengthening in manufacturing purchasing managers' indices.

“IHS Markit (the PMI data provider) has emphasized that both input costs and output prices are currently rising at faster rates. The input costs have increased because of shortages due to demand outstripping supply. This provides a rising demand for container shipping, as the shortage mainly comes from partly finished goods (and equipment used for production of consumer goods).”

The IMF increased US economic growth forecasts for 2018 to 2.7% from 2.3% previously and to 2.5% from 1.9% on expectations of more activity in light of the revised US tax bill. Half of the upward revision for global growth estimates in 2018 and 2019 will be due to US output and the knock-on effect on trading partners.

“For the container shipping industry, the economic picture in the US is favourable, with a possible pick-up in wages boosting consumer demand.

In Asia, the IMF revised Chinese GDP growth forecasts up to 6.6% in 2018 and 6.4% in 2019 from 6.5% and 6.3% previously on stronger external demand, while Japan's strong seasonally-adjusted industrial production figures led to the revision of GDP growth estimates to 1.2% for 2018 and 0.9% in 2019 from 0.7% and 0.8% respectively.

Global trade volumes totalling 67m teu in 2000 rose to 192m teu in 2017, while 5,083 vessels that comprised the global fleet in 2012 moved 155m teu compared with 5,159 ships in 2017 moving global volumes 24% larger.