- Unique analysis of millions of invoices on the Demica supply chain finance platform reveals the performance of four key industry sectors
- Sales values across the transportation and logistics, paper and packaging manufacturing, and computer and electronics sectors fell in Q3 2023 compared to Q3 2022
A key index monitoring millions of invoices from over a thousand large businesses across Europe and North America, shows the year-on-year value of sales fell in three of four bellwether sectors in Q3 this year.
The key findings are:
- Sales values in the transportation and logistics sector were 27% down (Q3 2023 vs Q3 2022)
- Paper and packaging manufacturing sales values fell by 24% (Q3 2023 vs Q3 2022)
- The computer and electronics sector lost 18% in sales value (Q3 2023 vs Q3 2022)
- Tier 1 automotive was the outstanding performer – achieving an 11% increase in the value of sales (Q3 2023 vs Q3 2022)
The figures form part of the Demica Index – a unique analysis of trade receivables from 1,200 large corporate companies in Europe and North America. Launched in January 2020, the index analyses anonymised data from millions of invoices processed on the Demica supply chain finance platform. Using baselines, the index provides unique real time insight into sector performance across the economy as invoice data is uploaded on a daily basis.
Transportation and logistics
The transport and logistics sector saw a steep drop in Q3 2023 compared to Q3 2022, with a 27% lower sales value Demica figures show. The fluctuation of sales values within the quarter followed a similar trajectory in 23 as 22, rising from July to August and then falling from August to September.
Over the quarter, continued[1] high inventory levels, lack of demand and growth of capacity have combined to drive rates down. A continuing freight recession[2] in the US may indicate a readjustment from pandemic-related demand surges. Market rates in air freight have declined but remain higher than the pre-pandemic levels.
Maersk exemplifies the difficulties in this sector. Having delivered strong Q3 results[3] last year, the shipping giant may have lost significant earnings in Q3[4] this year, according to industry reports. In October, the US digital freight brokerage Convoy[5] closed, blaming a “massive freight recession and a contraction in the capital markets.”
Paper and packaging
This paper and packaging sector has experienced stiff challenges including the downturn in consumer demand[6] and the adjustment to greater sustainability in Europe and North America. The Demica Index reports a 24% decline in sales values for Q3 2023 over Q3 2022. The profile of the quarter has also diverged from Q3 2022, with sales values falling over the quarter in 2023 compared to rising across the quarter in 2022.
However, long-term demand for paper-based packaging is likely to grow as the use of plastic declines. Packaging remains stronger than paper as the supply chain adapts to the shift away from paper to digital documents. E-commerce also continues to grow, as does demand for innovative paper-based packaging. Future Market Insights[7] predicts 4.1% CAGR global market growth in the paper packaging market to 2033.
Computer and electronics
The Demica Index shows Q3 2023 performance for the computer and electronics sector follows the pattern of the previous two years, with sales values falling away in July, following on from a spike in June, before climbing again in September. This is related to seasonal factors such as the start of the educational year.
Overall, however, there has been retrenchment in this sector since the pandemic, when the mass migration to home working drove demand. Demica figures show Q3 2023 sales values were down 18% compared to Q3 2022.
Chipmaker TSMC,[8] Asia’s most valuable listed company, and a supplier to Apple and Nvidia, said net profit in Q3 this year fell year-on-year to T$211bn from T$280.9bn. But these results were better than analysts predicted and the company’s share price has risen on expectation of a recovery in demand for PCs and phones. Samsung also posted better-than-expected Q3 results. Apple’s fourth quarter revenue, which ended on September 30th, was down 1% year-on-year[9].
Tier 1 Automotive (direct suppliers to an OEM)
Q3 2023 was more stable for the tier 1 automotive sector than Q3 2022 when sales dropped in July and rebounded sharply in August, according to the Demica Index.
The growth in automotive sales shown in the Demica Index for Q3 2023 over Q3 2022 is likely to reflect the easing of post-pandemic supply chain problems and the increased sales of electric vehicles.
Examples of year-on-year growth in this sector include Tesla, which reported higher delivery numbers in Q3[10]. BMW’s BEV deliveries were up 79.6% year-on-year in Q3[11] and Polestar was also up 50% year-on-year in Q3[12]. But for high-end carmakers, Q3 proved to be difficult in China[13]. The European focus of Demica’s automotive data also means the Index does not reflect the impact of strike action on vehicle manufacturing in the US.
Maurice Benisty, Chief Commercial Officer at Demica comments: “As the world recovers from the COVID shock we see continued volume declines in Computers and Electronics as demand has fallen from artificially high levels. We’ve seen this trend across multiple sectors, with clients turning to us for working capital support as they look to offer extended payment terms to stimulate demand. On the other hand, we see encouraging results from the tier one automotive suppliers who are now able to fulfil demand from their customers. Finally, we see challenges in sectors linked to consumer spending, as commodity prices fall in anticipation of the weaker demand brought about higher interest rates and slower growth”
“As we look forward the expectation of “higher for longer” interest rates even as inflation falls across the US and Europe is likely to continue to drive demand for working capital finance. At the same time tighter credit markets are expected to see volumes pushed through receivables and payables programmes as opposed to more traditional bank and capital markets lending”.
Demica’s platform provides supply chain finance, a financing solution that helps organisations free up liquidity by financing their receivables and payables. As of 31st December 2022, the total value of Assets under Administration (AuA) on the platform in was $27bn.
