Trend watch
Air passenger counts have remained fairly stable as of late. It dipped for a third week, slipping to 17.2 million, though that pattern is typical during the late April/early May period. Nonetheless, that was the highest 7-day average ever for the first week of May. Hotel occupancy has also stayed stable, up modestly in the latest week.
Our take
The current obsession for investors and decisionmakers is freight, looking for signs of an economic slowdown because of the trade war. Thus far the freight data has largely remained solid, though there have been a few inklings of trouble ahead.
The recent surge in freight appears to be the result of consumers and companies scrambling to get ahead of sharply higher tariffs in the United States. The container unit volumes for the top 8 U.S. ports have jumped 10.1% year-to-date through March compared to 2024.
Long Beach, the second largest U.S. port, reported a strong 6.1% increase in April container unit volumes, pushing year-to-date volumes up 23.6% compared to the same period last year (slide 7). It remains to be seen what the rest of the ports report for April. Private freight figures that track freight volumes have noted strong April trends.
However, there is now evidence of the air pocket in the shipping volumes from China to west coast U.S. ports that we’ve mentioned here in recent weeks. On slide 8, we show the scheduled ship bookings from China to U.S., which collapsed in mid-April shortly after the escalation of U.S. tariffs on China to 145%.
Given the 20 to 30 days journey it takes for ships from China to reach the west coast of the U.S., the mid-April decline in bookings should begin to ripple into freight port volumes in May. That will appear on the west coast first and then on to the gulf and east coast in the subsequent weeks. Yet, the data on slide 8 suggests bookings have improved somewhat in late April, though it’s too soon to draw strong conclusions.
Meanwhile, global air cargo tonnage from Asia to North America dropped 12% in the last two weeks (through week 18) compared to the prior two weeks. This follows reports that companies, including Apple, also accelerated air cargo shipments in April.
In sum, the data and the sporadic company reports suggest that there was a freight slowdown in April. However, it remains to be seen if this was a temporary stoppage in early-to-mid April due to the tariff uncertainty, or if it foreshadows something more sinister that will linger for a longer period.
Furthermore, there’s very little evidence of a pullback in consumer demand. On the other hand, consumers have yet to see widespread price increases due to tariffs. Again, it's simply too soon to draw strong conclusions.
Bottom line
The U.S. economy has been resilient, though many things seem to be in a holding pattern awaiting resolution on the tariffs. The longer this uncertainty lingers, the more intense the headwind for the economy becomes in the near term. That has contributed to the recent bouts of volatility in financial markets, which we expect will continue for the foreseeable future.
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