Economic and aviation cycles: Are we at the peak yet? — December 2019

After an unprecedented eleven years of above-trend growth in the airline industry there are signs of demand weakness emerging that might give support to those who think it is time for a slowdown. The IMF in its October World Economic Outlook again downgraded its estimate for GDP growth in 2019 — by 30 basis points — to 3.0%, noting that the pace of economic activity remains weak and pointing out that the momentum in manufacturing has fallen to levels not seen since the global financial crisis. An uptick to 3.5% in 2020 is expected, however.

The rise of protectionist attitudes, particularly in the USA, and the trade war with China are likely to mean that the top four economic areas (US, China, Japan and Euro area — which between them account for half of global GDP) will see economic growth moderate further in the medium term. A large part of the organisation’s forecast for global economic uptick in 2020 comes from a recovery in emerging markets that had slowed in 2019, notably Brazil and India, or those emerging markets which had been under severe stress (such as Venezuela, Argentina and Iran) which may have bottomed out. It also highlights the severe risks on the downside — and the recent geopolitical tensions in the Gulf between Iran and the USA is a case in point — and that the outlook is “precarious”.