Alfred Kahn, the late economist and noted transportation deregulator, once famously claimed that if we simply used the word “banana” in place of inflation we would find some sort of happy equilibrium in pricing.
He was joking, or so we hoped — inflation at the time probably was driven more by oil prices than by potassium-deficient worries. But the underlying point was that psychology plays a significant role in the direction of an economy. To listen to any number of trade, transportation and logistics business leaders, the psychology entering 2012 is fairly troubled, clouded by enormous uncertainty with no clear drivers of the direction of trade and demand.
That’s the psychology. But the reality is there were many economic indicators heading toward the end of 2011 that gave a pretty good sense of what the coming year should look like, or at least the first few months. And although there are some serious concerns — the sovereign debt crisis in Europe, and the general state of the eurozone — there also are some signals that fears about the economy are as rooted in psychology as in reality.
The most upbeat news was in the U.S. housing market.
Sales of existing homes grew 4 percent in November to a seasonally adjusted annual rate of 4.42 million, according to the Nation-al Association of Realtors. That’s actually below the level most economists think is needed for a healthy housing market, but it also marks a step in a recovery from the lowest numbers in a generation and the deepest decline in several generations.
What’s more, housing starts also expanded 9.3 percent in November to the highest point in 19 months, and building permits reached the highest point in more than a year.
Those aren’t shipping numbers, but you can expect to see the home sales turn into economic activity that produces those shipments in the first half of 2012. That’s why we’re not deeply concerned about the 0.2 percent decline in industrial production in the U.S. in November — it was mostly the result of a dip in automobile production, and that will likely recover in the new year.
The other thing we know with some certainty is that no matter how the economy behaves, the businesses that ship goods — whether retailers or manufacturers — will remain focused on maintaining lean inventories and putting risk mitigation ahead of maximizing revenue. That became the driving concern in the fall of 2008, and companies have only refined that focus since.
The relatively strong results in the U.S. trucking and railroad industries in 2011 were largely the result of decisions in those industries to mirror the strategies of their shipping customers. As one shipper told us in the fall, “We’re importing goods when we get an order, not importing first and then hoping for an order.”
For the container shipping industry, 2012 essentially started in the fall with the redrawing of alliances and vessel-sharing agreements. The carriers have set their capacity terms and now are pushing for pricing to grow. In other words, they’re looking for more bananas.