Get Out of the Way

Don Ratajczak has a few choice words for supply chain interests worried about the direction of the U.S. economy this year and beyond: “I’m bullish, really bullish.” Speaking at the SMC3 Jump Start 2013 Conference in Atlanta on Jan. 23, the Georgia State University economist built a strong case for the rally shippers and carriers have craved since the worst recession in decades ended three years ago.

In the process, he takes a stand against institutions such as the World Bank and International Monetary Fund that have lowered global trade and economic forecasts in recent weeks, and points to a recovering U.S. housing market, renewed growth in China driven by a pickup in manufacturing, and positive signs even in recessionary Europe and Japan.

But like any economist making bold predictions, Ratajczak is quick to hedge his bets. Ultimately, he says, growth in the 3 percent range for the year — and higher in 2014 — will occur only if “Washington gets out of the way.”

He’s speaking, of course, of the remaining “fiscal cliffs” the country must dodge, the first of which will come on March 1 when $109 billion in spending cuts are due to take effect following January’s deal to raise taxes as part of the American Taxpayer Relief Act.

Until Washington “gets out of the way,” the economy will maintain its stodgy pace, curtailed by the same consumer caution and federal spending cuts that helped push GDP in the fourth quarter of 2012 to its first contraction in more than three years, Ratacjak says.

The real pickup, Ratacjak and other economists say, will come in the second half of the year, when the housing rally picks up steam, when automobile production resumes (he says production will pause early this year so that sales can catch up to the rapid factory activity of the last several months), and when industrial production and U.S. exports overcome the fallout from the grounding of Boeing’s Dreamliner jet.

And, in what can only be good news for ocean carriers introducing a record amount of new capacity this year, there could be some inventory rebuilding. That’s especially the case in “tight” areas such as furniture and other home goods, the single-largest import category for global container lines serving the U.S.

That’s a stance with which JOC Economist Mario O. Moreno agrees, even if Moreno is slightly more pessimistic that the economy can overcome the fiscal challenges in the U.S. and Europe. “If housing continues to recover, furniture imports will continue to increase,” Moreno says in a story on page 22.

For now, supply chain interests will have to contend with the business environment that has dominated global markets for the past year: downside risks related to the eurozone and U.S. fiscal crises that threaten another, wider recession; slow growth or recession in other key markets; and supply-demand imbalances.

But notwithstanding the fourth quarter hiccup, there’s a discernible optimism from Main Street to Wall Street that better days are ahead later this year … if Washington can just get out of the way. 

Contact Chris Brooks at cbrooks@joc.com and follow him at twitter.com/cbrooks_joc

 

 

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