Head of Macroeconomic Research
Summary: Our 'Macro Chartmania' series collects Macrobond data and focuses on a single chart chosen for its relevance. It is published on a weekly basis. Today, we are looking at Hong Kong air volume freight as a proxy of the whole Chinese economy. The latest data was released less than two weeks ago, on 11 November.
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Today’s edition is about global air freight. We monitor air cargo growth statistics from major hubs in Asia and in Europe as they usually are sensitive to changes in the business cycle, especially in the manufacturing sector. This gives us interesting insights on the real state of the economy. On 11 November, the latest data was published for Hong Kong International Airport. This is the busiest air cargo hub in the world. Let’s put it that way, this does not draw a positive picture of the Chinese economy. The strict zero Covid policy continues to have a negative impact. After a strong rebound in 2021, freight volumes have been in contraction since February onwards. There is no hope for improvement anytime soon. The latest print for October shows a drop of 23.8 % year-over-year. This is close to the lowest historical point ever reached in January 2009 at minus 28.9 %. This is worse than during the first global lockdown of Spring 2020 (minus 13.1 %). The 3-month moving average, which smooths out the effects of month-to-month changes, was out at minus 23,2 % year-over-year in October. This is another confirmation that the zero Covid policy is a serious drag for the Chinese economy. But we doubt the country can exit from it anytime soon (even an easing of Covid-19 control measures seems a bit far away now that new cases are surging in several major cities). If we extrapolate figures from Taiwan (which is the latest example to exit zero Covid policy), China could expect 700 000 Chinese to die in five months. Of course, this is only a rough estimate. But it shows that exiting the zero Covid policy is not possible, for now. All of this also has global implications. While China contributed to about 30 % of global growth impulse before the pandemic (more than the combined contribution of the United States and the eurozone), it is now down at roughly 10 %. China is not anymore the global growth engine it used to be along with the United States.
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As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
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