Post by HardTimeTrucker on May 6, 2009 6:33:29 GMT -5
U.S. ports look to consumer for recovery
Mon May 4, 2009
By Nick Carey - Analysis
DETROIT (Reuters) - Wanted by American ports, truckers and railroads:
U.S. consumers, willingness to "shop till you drop" desirable.
There have been recent signs the U.S. economy may be stabilizing after a deep dive, offering hope a recovery could be on the horizon.
But U.S. import numbers still paint a grim picture and few economists or transport industry executives are banking on a recovery in the level of goods coming into the United States without consumers regaining some of their old shopping habits.
Consumer spending has in recent years contributed about 70 percent of U.S. gross domestic product. When the economy is booming that means a lot of consumer goods are sucked in from overseas but when demand slips, imports tend to suffer.
"What will drive imports is the U.S. consumer," said Jim Young, chief executive of No. 1 U.S. railroad Union Pacific Corp. "We're not optimistic that consumers will start spending again in the near term."
Like the other major U.S. railroads, Union Pacific hauled a growing number of containers full of consumer or finished goods when the economy was stronger -- shipments referred to as "intermodal" as they use standardized containers that can be interchanged between ship, truck and train.
But with the downturn, containerized trade has plummeted. Union Pacific reported a 23 percent first-quarter drop in intermodal shipments.
Indeed, the speed, scope and scale of the U.S. decline after the collapse of Lehman Brothers last fall -- which nearly took down the financial system with it -- has been breathtaking, with stunning first-quarter freight declines.
"February is generally not a good month, but this year it was awful," said Mike Keenan, head of harbor planning and economic analyst for the Port of Los Angeles, which together with the Port of Long Beach makes up America's largest port.
In February, container traffic at the port fell nearly 33 percent from a year earlier. While Los Angeles port saw a daily average of 16 container ships in 2008, that fell to 13 to 14 a day in February.
According to Paris-based shipping consultant AXS Alphaliner, the drop in containerized trade has left around 10 percent of the global container ship fleet idled.
GLIMMERS OF HOPE
But there are signs the economy could be near a bottom.
For instance, container traffic at the Port of Los Angeles in March was down slightly under 10 percent from a year earlier. A modest recovery in consumer spending in the first quarter after it collapsed in the second half of last year may have helped.
"There is always a slight seasonal uptick from February to March," Keenan said, "but the March numbers show a real improvement from February."
One piece of data generating some optimism was the Institute for Supply Management's March index of new orders in manufacturing, which stood at 41.2. The index has to be above 50 to show economic growth, but March was vastly better than December's index of 23.1.
"We're slowly seeing some industries move toward growth," said Norbert Ore, head of the ISM manufacturing survey.
NOWHERE TO HIDE
But the possibility of America's economy being near the bottom does not necessarily mean a recovery on the waterfront is that close.
IHS Global Insight forecasts containerized imports at U.S. and Canadian ports down 20 percent in the eight months to the end of August, with declines slowing to 9 percent by December.
"The slower pace of decline will be due partly to having a lower base to grow from," said Andrei Roudoi, international trade forecasting manager at IHS Global Insight, "but also to slight improvements in the economy."
Growth may be slow returning because this is a global recession. In localized recessions a country can export its way to health, but Simon Johnson, a senior economist at the Peterson Institute for International Economics, said this downturn was pernicious because there is nowhere to export to.
IHS Global Insight forecasts global containerized trade will fall 5.8 percent in 2009 and is predicting declines in every region around the world.
"I'm not sure if Mars is open for business," Johnson said, adding that growth once the economy begins to come out of the recession will be subpar.
What would make a real difference is if the U.S. consumer -- the engine of the global economy -- started shopping again, creating orders for manufacturers in other countries.
Uri Dadush, a senior associate at the Carnegie Endowment for International Peace and former director of international trade for the World Bank, said that when the recovery comes it could be fairly robust as stock markets and house prices could rise quickly from their lows, creating a "virtuous circle" that would boost consumer confidence.
"But it could go either way," Dadush said. "It's marginally more likely we'll get a recovery this year or in 2010. But it's also entirely possible we end up deeper in the hole."
But James Pressler, an economist at Northern Trust, argues that "deleveraging" by overextended U.S. consumers -- cutting back spending while boosting savings -- is likely to be a lasting phenomenon.
Consumers who took on too much debt and now find their houses are worth less than they paid for them or have big credit card bills to pay off, are going to be prudent about how they spend. Those who have lost their jobs or fear they could only add to the cautious sentiment.
"Those exporters relying on the once vibrant U.S. consumer should start looking for a new market," Pressler said. "This side of the Pacific is not going to be as friendly as it used to be."
"It is going to be hard times for the West Coast ports," he added
Mon May 4, 2009
By Nick Carey - Analysis
DETROIT (Reuters) - Wanted by American ports, truckers and railroads:
U.S. consumers, willingness to "shop till you drop" desirable.
There have been recent signs the U.S. economy may be stabilizing after a deep dive, offering hope a recovery could be on the horizon.
But U.S. import numbers still paint a grim picture and few economists or transport industry executives are banking on a recovery in the level of goods coming into the United States without consumers regaining some of their old shopping habits.
Consumer spending has in recent years contributed about 70 percent of U.S. gross domestic product. When the economy is booming that means a lot of consumer goods are sucked in from overseas but when demand slips, imports tend to suffer.
"What will drive imports is the U.S. consumer," said Jim Young, chief executive of No. 1 U.S. railroad Union Pacific Corp. "We're not optimistic that consumers will start spending again in the near term."
Like the other major U.S. railroads, Union Pacific hauled a growing number of containers full of consumer or finished goods when the economy was stronger -- shipments referred to as "intermodal" as they use standardized containers that can be interchanged between ship, truck and train.
But with the downturn, containerized trade has plummeted. Union Pacific reported a 23 percent first-quarter drop in intermodal shipments.
Indeed, the speed, scope and scale of the U.S. decline after the collapse of Lehman Brothers last fall -- which nearly took down the financial system with it -- has been breathtaking, with stunning first-quarter freight declines.
"February is generally not a good month, but this year it was awful," said Mike Keenan, head of harbor planning and economic analyst for the Port of Los Angeles, which together with the Port of Long Beach makes up America's largest port.
In February, container traffic at the port fell nearly 33 percent from a year earlier. While Los Angeles port saw a daily average of 16 container ships in 2008, that fell to 13 to 14 a day in February.
According to Paris-based shipping consultant AXS Alphaliner, the drop in containerized trade has left around 10 percent of the global container ship fleet idled.
GLIMMERS OF HOPE
But there are signs the economy could be near a bottom.
For instance, container traffic at the Port of Los Angeles in March was down slightly under 10 percent from a year earlier. A modest recovery in consumer spending in the first quarter after it collapsed in the second half of last year may have helped.
"There is always a slight seasonal uptick from February to March," Keenan said, "but the March numbers show a real improvement from February."
One piece of data generating some optimism was the Institute for Supply Management's March index of new orders in manufacturing, which stood at 41.2. The index has to be above 50 to show economic growth, but March was vastly better than December's index of 23.1.
"We're slowly seeing some industries move toward growth," said Norbert Ore, head of the ISM manufacturing survey.
NOWHERE TO HIDE
But the possibility of America's economy being near the bottom does not necessarily mean a recovery on the waterfront is that close.
IHS Global Insight forecasts containerized imports at U.S. and Canadian ports down 20 percent in the eight months to the end of August, with declines slowing to 9 percent by December.
"The slower pace of decline will be due partly to having a lower base to grow from," said Andrei Roudoi, international trade forecasting manager at IHS Global Insight, "but also to slight improvements in the economy."
Growth may be slow returning because this is a global recession. In localized recessions a country can export its way to health, but Simon Johnson, a senior economist at the Peterson Institute for International Economics, said this downturn was pernicious because there is nowhere to export to.
IHS Global Insight forecasts global containerized trade will fall 5.8 percent in 2009 and is predicting declines in every region around the world.
"I'm not sure if Mars is open for business," Johnson said, adding that growth once the economy begins to come out of the recession will be subpar.
What would make a real difference is if the U.S. consumer -- the engine of the global economy -- started shopping again, creating orders for manufacturers in other countries.
Uri Dadush, a senior associate at the Carnegie Endowment for International Peace and former director of international trade for the World Bank, said that when the recovery comes it could be fairly robust as stock markets and house prices could rise quickly from their lows, creating a "virtuous circle" that would boost consumer confidence.
"But it could go either way," Dadush said. "It's marginally more likely we'll get a recovery this year or in 2010. But it's also entirely possible we end up deeper in the hole."
But James Pressler, an economist at Northern Trust, argues that "deleveraging" by overextended U.S. consumers -- cutting back spending while boosting savings -- is likely to be a lasting phenomenon.
Consumers who took on too much debt and now find their houses are worth less than they paid for them or have big credit card bills to pay off, are going to be prudent about how they spend. Those who have lost their jobs or fear they could only add to the cautious sentiment.
"Those exporters relying on the once vibrant U.S. consumer should start looking for a new market," Pressler said. "This side of the Pacific is not going to be as friendly as it used to be."
"It is going to be hard times for the West Coast ports," he added