Import Air Freight Prices Are Soaring

Import air freight prices have doubled over 2 months.

Import air freight prices only doubled for products coming from Asia. The reason for this is because of a scarcity of flights from Asia to the world, pushing up air freight prices.

What this means is that producers outside of Asia will need to pay a lot more for their imports to produce things. This will increase their cost of production. As a result, the Producer Price Index will go higher and the producers will need to push these costs to the consumer, which will increase the Consumer Price Index for many consumer goods.

This will also have a large effect on the trade deficit as imports rise while exports decline. I expect trade deficits to balloon in May 2020.

Air Freight Vs. Trade Balance

I have noticed that Import-Export Air Freight numbers are correlated to the Trade Balance. We see a surge in import air freight numbers in April 2020 which could translate in a higher trade deficit.

Cass Freight Index Vs. GDP

Another way to predict real GDP is to look at the transportation sector. The Cass freight index is correlated to GDP.

Similarly, air cargo is correlated to GDP. That is why in 2020, the coronavirus had a significant effect on GDP as air transportation had been disrupted.

Freights Vs. Real GDP

The freight index is correlated to real GDP.

In 2019, we see a disconnect between the two and I expect that real GDP will be going down.