After a painful fall and a slow climb back, U.S. container imports from Asia next year should reach levels approaching their 2007 peak, driven by improving global trade that should feed goods into distribution channels ready for a sustained recovery.
PIERS, a sister company of The Journal of Commerce, forecasts trans-Pacific imports from Asia will rise 7.7 percent next year to 13.4 million 20-foot-equivalent units — close to the record 13.6 TEUs in the pre-recession year of 2007.
“That sounds real good, except we lost four years,” said Walter Kemmsies, chief economist at marine infrastructure engineering firm Moffatt & Nichol. “But at least we’ll be back to where we were.”
PIERS projects total U.S. containerized imports next year will increase 4 percent to 17.7 million TEUs, 1.6 million TEUs below the 2007 peak. Volume is forecast to rise 8.8 percent from the Middle East and 5.3 percent from the west coast of South America but is expected to decline 1.1 percent from the east coast of South America, 4.4 percent from the Mediterranean and 7.3 percent from northern Europe.
Exports are forecast to increase 4.6 percent next year to a record 11.6 million TEUs, driven by a weak U.S. dollar and rising strength in emerging and developing nations. PIERS expects 2010 to end with increases of 15.5 percent in imports and 4.3 percent in exports from 2009’s depressed levels.
“Our forecast is positive but moderate,” said Mario O. Moreno, economist for PIERS and The Journal of Commerce. “We look for growth in containerized imports and exports in the year ahead, but there are many risks.”
Next year’s import projections hinge on several variables, including how quickly jobs and housing markets in the United States recover, how the dollar fares against other currencies, and how consumers balance pent-up demand to spend against their need to save and their ability to borrow.
Still, there’s a growing sense among trade economists that the worst is over, and that the economy and container volumes will improve gradually in the year ahead.
“If you look at the trend and don’t jump on the short-term fluctuations, numbers like industrial production and capacity utilization are pretty solid,” Kemmsies said. “If we get back to the 2007 level of economic activity, with all the outsourcing and growth in U.S. exports that we’ve seen, we have to expect the container volumes will be at least to 2007 levels by the end of next year.”
The Federal Reserve said U.S. manufacturing production rose 0.5 percent in October, led by increased output of long-lasting goods such as automobiles, appliances and business equipment. The sector shrank more than the broader economy during the recession but has been recovering more quickly, driven by pent-up demand at home and growing demand overseas.
The International Monetary Fund’s latest world economic outlook predicts global economic growth of 4.2 percent, rising toward the second half of the year, compared with 4.8 percent in 2010. The IMF forecasts output of emerging and developing countries will grow 6.4 percent, compared with 2.2 percent in advanced economies such as the U.S., Europe and Japan.
The IMF forecast, issued in October, called for a 2.3 percent increase in U.S. GDP next year. Other economists are more optimistic. They cite the expected stimulus of the tax-cut compromise, the Fed’s latest easing of monetary policy and indications that housing markets are stabilizing.
A Wall Street Journal survey of 55 economists showed rising optimism about growth next year. The economists’ predicted GDP growth will rise 3 percent, and most said the economy is more likely to outperform than to underperform their forecasts.
“In 2011, the U.S. economy is likely to be firing on more cylinders — especially during the second half,” Nariman Bahravesh, chief economist at IHS Global Insight, wrote in a research note this month. He predicted U.S. GDP would rise 2.1 percent in the first half of the year, accelerating to 2.7 percent in the second half.
Kemmsies also expects growth to accelerate during the second half of 2011. He said as the economic recovery takes hold, companies would shift from cost-cutting to investment that will reinforce economic growth and provide a long-term foundation for increased container volumes.
Growth in container imports has risen with consumer demand, which accounts for 70 percent of U.S. economic activity and supports containerized imports of products ranging from televisions to tennis rackets. Half of U.S. containerized imports come from China. Other Asian countries account for nearly a quarter of the total.
After throttling back during the recession, consumers have resumed spending, albeit cautiously. Retail sales have risen through much of 2010 and are on track to recover their 2007 peak by the middle of next year. The Commerce Department report that retail spending grew 0.8 percent in November following October’s 1.7 percent year-over-year growth gave a boost to the outlook for consumer spending.
The National Retail Federation raised its growth outlook for holiday season sales from an earlier 2.3 percent to 3.3 percent, saying stores were seeing pent-up demand released in the run-up to the holidays. “The start to the holiday season has surpassed all expectations,” NRF President Matthew Shay said in a statement. “While employment data is still a concern, we are starting to see improvement in other economic indicators that support an increase to our forecast.”
That outlook could reverberate across shipping channels in early 2011 if strong seasonal sales push retailers and distributors to replenish inventories, echoing the restocking moves that drove shipping growth early in 2010.
Consumer spending could be affected by the Fed’s second “quantitative easing” of monetary policy. Chairman Ben Bernanke said the central bank’s action is an effort to stimulate demand and avoid price deflation that undermines economic recovery.
The Fed’s bold move offers promise but carries risks. “If the American consumer says, ‘Thanks, but no thanks, Mr. Bernanke, I’ll continue deleveraging and paying off my debt,” then we won’t see the hoped-for growth in domestic demand,” Moreno said.
IHS Global Insight forecasts November-December retail sales, excluding automobiles, gasoline, food and non-store sales, will be up 4.5 percent from last year. The ratio of retail inventories to sales has inched up in the second half of this year but remains far below pre-recession levels.
Consumer confidence is improving, surveys indicate. The widely watched Reuters-University of Michigan survey of consumer confidence hit a six-month high in a December before the Obama administration and congressional leaders reached a tentative deal on a tax-cut extension.
The rising confidence came despite high unemployment levels and weak finances in many households.
The U.S. unemployment rate registered 9.8 percent last month and is expected to remain above 9 percent through 2011. Moreno notes the unemployment rate for the last 30 years has averaged 6.3 percent. “It’s going to take a while to get back to that level — probably 2015 or 2016,” he said.
Many Americans, meanwhile, are chipping away at debts accumulated during the credit-fueled boom. “Consumers are still in the process of deleveraging,” Moreno said. Household liabilities as a percentage of disposable personal income are down from their 2007 peak of nearly 140 percent but remain above 120 percent. The decline in housing prices had a big impact on household wealth. Weak housing markets also affected container volumes.
Housing sales often trigger consumer purchases of furniture and home furnishings, which account for 10 percent of U.S. containerized imports. Furniture imports spiked with last spring’s tax credits for home buying but declined for four straight months beginning in June, PIERS data show.
But there also is confidence evident in the market. PIERS data also shows U.S. containerized lumber exports grew 38.7 percent in the first 10 months of 2010, and the 80,382 TEUs in exports were already close to the total the U.S. exported in all of 2007.
Although many forecasters predict continued declines in housing prices next year, a recent decline in the percentage of houses in foreclosure suggests the housing market may have turned a corner.
Mortgage delinquencies remain close to 10 percent, the historical peak, but the Mortgage Bankers Association reports the number of mortgages delinquent by 30 days is down 11 percent since early 2009. Credit-reporting company TransUnion forecasts the percentage of loans 60 or more days past due would fall to 4.98 percent of all mortgages by the end of next year from an expected 6.21 percent at the end of this year.
Contact Joseph Bonney at email@example.com.