The ITF recently revealed that airfreight has grown considerably and now is above pre-crisis levels. Our work on inventory-driven bullwhip can shed some light on how this serves as a strong predictor that industrial output will grow. Airfreight is much more expensive and emits substantially more carbon than ocean freight. As a consequence, companies will try to avoid air freight as much as possible, with the exception for those products that have short life cycles and/or are very expensive. Ocean freighting those products may leads to substantial increases in inventory costs that may offset the gain caused by lower transport costs of ocean shipping vs air shipping. For air freight to rise this dramatically, however, more is needed than just increase in expensive goods.

There is another reason for using more air freight, and this is when inventories are too low to supply customer demand. Airfreight is then used as an emergency mode of transportation, to temporarily replace ocean shipments by air shipments for those products that run out. This is however an expensive option. It is therefore likely that companies will try to increase their inventories, thus causing an increase in production requirements, easily leading to an inventory-driven bullwhip.

Following this reasoning, we may expect an accelerated growth in industrial output. Maybe this explains the positive growth figures of the last quarter of 2014. Unfortunately, reliable inventory data are missing, but we may see further accelerated growth in the upcoming months.