The air freight market showed signs of weakness in the first quarter as fuel costs remain stubbornly high and demand remains weak, new data from the International Air Transport Association (IATA) show. Economic uncertainty reigns in Europe, and consumer confidence is flagging, even in China, both of which are putting pressure on air cargo.

The U.S. recovery, although fragile, remains on track. Consumer and business confidence are rising, fueling demand for air freight. But signs that some shippers are switching modes to surface transit are becoming apparent, the IATA data show. “Perishable items will continue to go by air,” says industry consultant George Hamlin. “But surface transport is becoming more efficient.”

Consumer confidence in China and in Europe is flagging, according to IATA data, and this is hitting demand for shipment of such benchmark items as semiconductors. Elsewhere in Asia, air cargo is recovering from the floods in Thailand last year. International freight traffic measured by revenue ton kilometers is down sharply from a peak in May 2010, IATA says. “The growth potential [for air cargo] is enormous,” IATA Director General Tony Tyler said in a statement. “The challenge is to propel that growth sustainably, with quality products, efficiently delivered by a well-coordinated value chain.”

Michael Steen, executive VP of Atlas Air, took a more bullish view, predicting 4.6% annual growth for air cargo in the next decade. Some of this would come from industry restocking inventories depleted first by the economic crisis and, as that burns off, by increasing consumer demand.

But this view could be overly rosy, says Hamlin. “Companies are unlikely to incur more risk,” he says. “Going long in inventories now is both risky and unfortunate.” The IATA data show, however, that inventory-to-sales ratios remain close–suggesting little inventory overhang.

World trade remains strong, even if the recovery is fragile; however, container shipping appears to be the main beneficiary of this strength. Volumes for container shipping remain strong in every region of the world. Excess capacity is keeping container ship rates down.

An IATA survey of heads of cargo shows that most see flat traffic growth and further declines in yields.

Fuel prices remain high, putting further pressure on cargo profits, the IATA data show.