This is the season when Major League Baseball teams watch the scoreboard for updates on the standings. Container lines and shippers are doing the same thing with economic news as they seek clues to future demand.
Some clues are well-hidden. Economic indicators have been choppy as the U.S. continues its protracted recovery from the 2008-09 recession. The slow growth is reflected in containerized imports, which only now are approaching pre-recession levels.
Journal of Commerce Economist Mario O. Moreno forecasts that U.S. containerized imports will rise 4 percent this year. After growth of 3.5 percent in the first quarter and 1.2 percent in the second, he expects third quarter volume to increase 4.5 percent. He expects fourth quarter volume to rise 6.5 percent, aided by easy comparisons with last year.
“There’s good data out there that makes me believe the second half will be better than the first half — not remarkably better, but enough to make me believe there will be a modest peak season this year,” he said.
Inventory restocking will help boost imports in the second half of 2013, Moreno said. Retailers over-ordered in the first quarter and thinned their inventory levels in the second quarter. Now they’re forced to rebuild stockpiles to meet demand.
Current economic data will have little influence on the pre-holiday import peak season, which is well under way. With most peak-season shipments already shipped or booked, companies are looking ahead to 2014.
Moreno forecasts containerized imports will increase 4.7 percent in 2014. He predicts exports to finish the year with a gain of 2.6 percent after rising only 0.3 percent in the first half. He looks for exports to increase 3.4 percent in 2014.
The monthly Global Port Tracker report by the National Retail Federation and Hackett Associates predicts imports through the largest U.S. container gateways will finish the year up 2.4 percent. Port Tracker expects year-over-year increases of 1.7 percent in August, 1.9 percent in September, 8.3 percent in October, 6.7 percent in November and 3.5 percent in December.
Economic growth has been sluggish by standards of recent years. After becoming accustomed to GDP increases of 3 percent or more, growth has hovered around 2 percent since its 3.1 percent plunge during the recession. The Commerce Department’s final estimate for the second quarter pegged GDP at a 2.5 percent annual growth rate.
The economy’s future trajectory will hinge largely on government monetary policy, and on how Washington deals with partisan bickering over spending and taxes and the possibility of a renewed budget sequester next year. There’s also the specter of Middle East unrest and its effect on oil prices.
“What really matters for the U.S. now is for the unemployment rate to go down,” said Walter Kemmsies, chief economist at port engineering firm Moffatt & Nichol. Consumer spending accounts for more than two-thirds of the U.S. economy, and jobless consumers can’t spend much.
News from the jobs front has been modestly positive in recent months. The unemployment rate fell to 7.4 percent in July, a 4½-year low. Unemployment claims have been dropping, and payrolls have been rising.
“We need a minimum of 150,000 new jobs a month for the housing market to continue its recovery,” Moreno said. “The economy has added an average of 192,000 jobs a month this year.”
On the negative side, wage increases haven’t matched the job growth. Many new jobs are part-time or low-paying positions, and wages have been stagnant. Average hourly pay for a nongovernment, non-supervisory worker, adjusted for inflation, declined to $8.77 in July from $8.85 in June 2009, Labor Department data show.
Tepid data on income, spending and inflation are leading many economists to predict that the Federal Reserve’s governors, scheduled to meet Sept. 17-18, will act cautiously on reducing Fed bond purchases that have kept interest rates low.
The Fed’s rates have a direct impact on rates for loan instruments such as home mortgages. Average rates for 30-year fixed mortgages have risen by about 1 percentage point, to around 4.5 percent, since May, when Fed Chairman Ben Bernanke first signaled the bank’s plans for “tapering” its bond buying.
Housing is a pillar of the U.S. economy and supports containerized imports such as furniture, which accounts for about 10 percent of total annual volume.
When people move into a new house or apartment, they tend to buy furniture, furnishings and appliances. All have benefited from the rebound in home construction, sales and prices. But with home prices rising and interest rates going up, companies are starting to worry about what’s ahead.
“We’re seeing positive momentum in housing, but the wild card is interest rates and the impact that has on housing affordability,” Robert Hull, chief financial officer and executive vice president at home improvement retailer Lowe’s, told analysts last month.
Lowe’s CEO Robert Niblock said that as long as mortgage rates rise gradually from their historically low recent levels, they shouldn’t cause much disruption, unless they rise to more than 6 percent or so.
Orders for durable goods — items expected to last at least three years — have been stronger in recent months than orders for nondurable goods such as apparel and footwear. Rising interest rates could alter that situation, economists say.
“Instead of putting a lot of money into retail goods like clothing and toys, consumers used their gunpowder to buy big-ticket durable goods,” Kemmsies said. “As interest rates go up, we might see a shift toward other retail goods, but it won’t be a huge shift.”
Gauges of consumer confidence show increased optimism, but not enough to cause retailers to break out the champagne.
The Conference Board, a New York-based private research group, said its consumer confidence index rose to 81.5 in August from a revised reading of 81 in July. The index was just below its June reading of 82.1, which was the highest since January 2008. That was far above the index’s nadir of 25.3 in February 2009 but still below the 90 reading that signals a healthy economy.
“It is becoming very evident that even though the housing market is gaining some traction and auto sales are looking up, there is not a tremendous amount of income support to keep consumer spending adjusted for price increases growing at very robust rates,” Chris G. Christopher Jr., IHS Global Insight’s director of consumer economics, said in an Aug. 30 commentary.
IHS Global Insight said it expected this year’s back-to-school sales — not-seasonally adjusted sales for family clothing, shoe, book, and computer and software stores for July through September — to rise 3.2 percent, continuing a trend of slowing growth during the last several years.
A rise in U.S. interest rates would affect exports by increasing the dollar’s value and making U.S. goods more expensive in overseas markets.
Kemmsies said weaker currencies in Brazil and Argentina are likely to hurt U.S. containerized agriculture exports, but for now, the export outlook is good. He said bulk agricultural exports in containers should increase about 5 percent over last year, and that capital goods will benefit from what appear to be signs of recovery from China.