SANTA MONICA - Economic indicators point to continued nervousness on the part of consumers, and this bodes ill for the back-to-school and holiday shopping seasons that drive cargo volumes in the eastbound Pacific trades.
Delos Smith, senior business analyst at the Conference Board, noted that despite a dozen interest rate reductions by the Federal Reserve, three tax cuts by the Bush administration and efforts by the Fed to pump up the money supply, the U.S. economy remains flat.
"Nothing seems to be happening," Smith told the annual conference of the American Institute for Shippers Associations Monday in Santa Monica, Calif.
Shipping lines are entering the busiest time of the year in the eastbound Pacific, the world's busiest trade lane. Back-to-school merchandise is moving now, and the peak shipping season will begin within the month.
The back-to-school and Christmas shopping seasons account for the majority of annual sales for retailers. Since retailers are among the largest-volume importers, shipping lines rely on consumer spending to generate the cargo that fills their vessels during the peak shipping season.
However, consumer attitudes in the most important time of the year for carriers and importers remain pessimistic. This was reflected in the Conference Board's latest survey on consumer confidence, released Tuesday in New York.
The survey of 5,000 households across the U.S. was down slightly from the May survey, which likewise found a mood of pessimism among consumers.
"We have an emotional economy. Economists don't like emotional economic indicators," Smith said.
Consumers still have not shaken their fear of terrorism since the September 11 attacks, and the military victory in Iraq did not do much to lift consumer confidence. Rising unemployment and corporate scandals have exacerbated consumer concerns about the ability of the business sector to govern itself and to create jobs.
Oil prices are about $30 a barrel, but they should be about $23, Smith said. The price of gold, a hedge against falling stock prices, is over $350. It would be about $280 if consumers had more confidence in the economy. "There's $70 of nervousness built into that number," he said.
Some economists argue that the U.S. has not emerged from the recession that began in 2001. Various indicators seem to imply an economy that is stronger than a normal recessionary economy but not one that is in a recovery mode.
Weekly unemployment claims are about 420,000, which is less than the 500,000 experienced in recent recessions but higher than the 300,000 to 325,000 figure during a period of economic recovery, Smith said. Retail sales are sluggish. Business spending has picked up slightly, but is still not what it should be if the economy were truly rebounding.
Globalization continues to push jobs to low-cost countries such as China. This is supposed to be good for consumers, but it is also bad for workers in some sectors of the U.S. economy. "How do you explain the global economic system to unemployed furniture workers in North Carolina?" Smith said.
Despite the uncertainty, U.S. imports from Asia continue to grow rapidly. Imports through May were up more than 10 percent compared to the same period in 2002, which was a record-breaking year in the eastbound Pacific.