Fuel consumption data raises concerns about economic downturn

Fuel consumption, which is one of the determining indicators of global economic activity, has recently started pointing to a recession.

Demand for fuel for heavy machinery, which powers vehicles such as commercial truck fleets and construction equipment, has weakened in most major economies. In contrast, in China, the number of trucks working on highways has decreased remarkably in recent weeks.

The data, seen as an early sign of weak industrial activity and lower consumer spending, raised concerns about a recession.

SHARP FALL IN TRUCK TRANSPORTATION

Most of the decline in diesel demand came from trucking, Bloomberg News reports. Trucks account for about 60 percent of total diesel in China and more than 70 percent in the United States.

The number of trucks working on Chinese roads fell 8 percent last week, according to data tracked by China’s Ministry of Transportation. Nationwide commercial diesel inventories, excluding state refineries, hit an eight-month high in April.

S&P stated that US fuel demand will contract 2 percent in 2023. The 2 percent drop is considered the biggest drop in US diesel use since 2016, excluding 2020, when the economy came to a standstill due to the pandemic.

STAGE RISK LOOKS HIGH

Economists predict a 65 percent chance of recession in the US and a 49 percent chance in Europe over the next year. While the risk is lower in China, a significant and rapid improvement in consumer confidence is required for the country to recover from the impact of the Covid-19 restrictions.

“We are anticipating one of the worst economic conditions in the recent past, in addition to the 2008-2009 financial crisis and the pandemic,” said S&P expert Debnil Chowdhury.

Ben Ayers, an expert at research firm Nationwide Economics, said: “Demand for diesel can be seen as an early sign that household spending is falling. “An expected decline in demand for diesel adjusts for recessionary risks across the economy,” he said.