Local air traders in Hong Kong signaled a "more optimistic outlook" for overall air trade to and from China in the third quarter amid the slow recovery momentum seen in June, according to the findings of the latest DHL Hong Kong Air Trade Leading Index (DTI).

The report — released on July 21 — said the overall air trade outlook saw a "rebound" during the quarter similar to the level before the fifth wave of the pandemic in the city which was driven by air imports and a growth in sales volume.

The report said the index recovered to 39.5 points from the 35.8 seen in the previous quarter mainly driven by a "significant rebound" in the Air Imports Index to 43.1 points, similar to the level prior to the fifth wave of the pandemic.

On the other hand, Air (Re-)Exports Index recovered slower to 37.0 points.

DHL said non-US currency markets showed a noticeable improvement in imports while Americas was the only market with a dip.

An index value above 50 indicates an overall positive outlook while a reading below 50 represents an overall negative outlook for the surveyed quarter. The further the reading is from 50, the more positive or negative the outlook is.

More optimistic outlook in Q3 found

"The recovery in Overall Air Trade Index was mainly driven by the rebound in Sales Volume Sub-index, while Shipment Urgency Sub-index recorded a mild growth and Product Variety Sub-index remained the same. In addition, a promising outlook on B2C business in Q3 2022 was observed," the report said.

The report — commissioned by DHL Express Hong Kong and compiled by the Hong Kong Productivity Council — said profitability level improved in Q2 2022 after the difficult business environment during which social distancing measures were tightened with high infection numbers in Hong Kong.

However, it noted that this was still "some distance behind" the pre-fifth wave of Q4 2021.

"Only one-fifth of local air traders respectively reported that their current businesses (i.e. June 2022) have grown better than that of the previous month after the improvement of the situation of the cross-boundary land transport of goods or the relaxation of social distancing measures in Eastern China," the report said.

"Although recovery in June 2022 showed slow momentum, a more optimistic outlook for overall air trade to and from China in Q3 2022 was observed with a 9-point jump compared to the previous quarter," it added.

Meanwhile, the report also said with shipping costs continuing to rise along with surging fuel prices, 39% of local air traders claimed they were inclined to share such additional costs with customers equally, while 40% of them would shift a higher proportion of such additional costs to their customers.

Compared with the findings two years ago, more local air traders were willing to share such a burden with customers.

During the period, the report also found that after recording a drop last quarter,  the Food & Beverage index saw a "significant rebound" in Q3 2022, returning to a level similar to before the pandemic's fifth wave. This, as Gifts, Toys, and Houseware as well as Electronic Products and Parts has dipped further.

Worst for air trade might be over

Commenting on the result, Edmond Lai, chief digital officer of the Hong Kong Productivity Council (HKPC) said the worst for the air trade sector could be over.

"The survey results suggest that the worst time of the air trade business due to the fifth wave of the pandemic might be over, as better profitability was reported for 2022 Q2," Lai said. "The positive outlook in air trade is expected to continue in 2022 Q3 as a result of the rebound in Air Trade Index, together with the optimism in online B2C business."

He added that such findings indicate a recovery in consumer demand generated from the relaxation in social distancing measures coupled with another round of Consumption Voucher release.

"However, the city is still vulnerable to the impact of another wave of the pandemic that will again pose a significant disruption to business operations and the supply chain," the HKPC executive added.

The DHL Hong Kong Air Trade Leading Index is the first indicator of its kind in Hong Kong that aims to provide a forward-looking perspective on overall air export and import trade volumes.

The first quarterly DTI was released in Q2 2014 by analyzing the key attributes of business demands based on a survey of more than 600 Hong Kong companies that focus on in- or outbound air trading.