Against the backdrop of a global economic slowdown, the European Union's growth engine is showing signs of fatigue. How severe is this economic deceleration, and what impact will it have on the EU's vast and complex logistics network? This analysis examines the current state of the EU economy and develops a logistics pressure assessment framework adapted from Flexport's logistics pressure matrix concept.
Twin Pressures: Economic Slowdown and Inflation
Since Q4 2021, GDP growth across the EU-27 has slowed significantly. Data shows Q1 2022 growth at just 0.4%, marginally above the previous quarter's 0.5%. The stagnation of major economies like France has been a primary contributor to this slowdown. While Eastern European nations initially showed stronger growth, this trend likely reversed following the outbreak of conflict in Ukraine, which triggered commodity price surges and exacerbated inflationary pressures.
The energy component of the EU-27 Producer Price Index (PPI) rose 99% year-over-year in April 2022, slightly below March's 104% spike, reflecting volatility as energy supply chains reconfigured. Energy price increases drove the overall PPI up 37%. Additionally, strong demand and supply chain bottlenecks pushed prices for durable and non-durable goods up 8.5% and 11.2% respectively. These factors combined to produce an 8.8% EU-wide consumer price increase in May 2022 - the highest since the Harmonised Index of Consumer Prices (HICP) series began in 1997, and double the 2008 peak.
Persistent inflation has forced the European Central Bank to announce plans to taper quantitative easing and raise interest rates, measures that may dampen economic activity and consequently reduce logistics demand.
Notably, EU unemployment remains at historic lows (6.2% in April 2022), though significant disparities persist between Northern and Southern/Eastern member states, highlighting the challenges of addressing the bloc's diverse economic drivers.
Demand Indicators: Confidence, Sales and Inventories
To assess supply chain and logistics conditions amid economic weakness and high inflation, we track key demand indicators through an adapted logistics pressure matrix. Given data quality limitations, we focus on eight indicators spanning demand (consumer/industrial confidence, retail trade, inventory) and logistics activity (inflation-adjusted trade, freight rates, shipping reliability).
Consumer and Industrial Confidence
EU consumer confidence continues declining, with May's index at -22.2 (vs. -9.9 10-year average) - the lowest since April 2020. This reflects inflation concerns and Ukraine conflict uncertainty, potentially presaging reduced spending and lower logistics pressure. Industrial confidence also suffers from supply disruptions exacerbating existing component shortages, with Germany's manufacturing sentiment index at -17.3 in May (vs. +2.7 average).
Retail Trade Activity
EU retail sales, like the US, surged during the pandemic as spending shifted from services to goods. By April 2022, inflation-adjusted sales (excluding autos, food and fuel) remained 10% above April 2019 levels, though flat month-over-month growth suggests stabilization. Online sales improved slightly but remain 8% below year-ago levels. Overall, logistics pressure would only ease if real sales fell 5%+ from current levels.
Finished Goods Inventory
EU-wide wholesale inventory assessments show improvement from October 2021's -6.6 reading to -1.6 in April 2022, though significant national variations exist. Germany (capital goods-focused) remains below adequate levels, while the Netherlands (consumer goods-oriented) shows sufficient inventory. Assessments at or above zero would indicate reduced import needs and lower logistics pressure.
Activity Indicators: Trade, Freight and Reliability
Inflation-Adjusted Trade Volume
EU-27 nominal imports grew 19.9% year-over-year in April 2022, but inflation-adjusted imports fell 8.2% - the fourth consecutive decline. Real imports now sit just 1% below pre-pandemic levels, suggesting significant network pressure relief, though this data includes bulk, commodity and air/container shipments.
China-Europe Freight Rates
As of mid-June, China-Europe container rates have fallen 9% from February 2022 peaks but remain 5.2× 2019 levels, indicating fundamentally different market expectations versus pre-pandemic conditions.
Ocean Shipping Reliability
Flexport's Far East Westbound (FEWB) ocean timeliness metric shows Asia-Europe transit times have improved from April's 120+ day peak to 95 days, though still 90% above pre-pandemic levels. Recent improvements mainly reflect reduced delays at origin ports.
Air Freight Reliability
FEWB air timeliness has stabilized at 11 days since April, down from January's 17-day peak but still above the pre-pandemic 7-day norm. Ground handling and delivery remain primary constraints despite Ukraine-related airspace disruptions.
Flexport EU Logistics Pressure Matrix: Comprehensive Analysis
The logistics pressure matrix uses a 10-level color scale (red=high pressure, green=low pressure) relative to January 2019-present. Current indicators suggest:
- Sentiment metrics point to reduced future pressure, though retail sales remain elevated and inventories incomplete
- Inflation-adjusted trade activity shows steady return toward pre-pandemic levels
- Freight rates remain elevated and reliability lags pre-pandemic performance
In summary, while fundamental drivers of European logistics demand are easing, transportation costs and reliability metrics indicate the network continues facing considerable pressure.