Two-Track Economy

Fasten your seatbelts, as that non-vessel operator Bette Davis famously said, it’s going to be a bumpy ride.

The news last week that sales of existing homes in the United States jumped 7.7 percent in August was such good and unexpected news that it seemed hard for many, particularly those in the shipping industry, to know how to respond.

The housing market was at the heart of the financial industry collapse in 2008, and there is a strong case to be made that the ongoing weakness in home sales has contributed perhaps more than any other factor to the halting nature of the recovery from the steep — steeper than we thought at the time — economic collapse of 2008-09.

Yet the housing numbers also underscore the double-track the broad consumer-driven U.S. economy is on this year, why signals of improvement in the economy are being greeted with something more like puzzlement than applause and why uncertainty in the outlook still reigns.

For the shipping industry, there was similar surprise at last week’s release of the latest Port Tracker report, the monthly assessment of container shipping trends issued by the National Retail Federation and Hackett Associates. The Port Tracker, which measures business at the 10 largest U.S. ports, projects an 11.8 percent increase in import cargo in September and another 9.5 percent expansion in October — a huge turnaround from the increasingly weak numbers ports have reported since late spring.

Those are hardly the numbers you’d expect from an economy heading into a double-dip recession, or in an industry in which vessel operators are seemingly on the cusp of idling ships again in a way that threatens to reawaken the strained relations between carriers and shippers that resulted from the earlier era of ship layups.

But there is enough in the larger numbers to merit some caution.

The home sales numbers certainly hit a five-month high, but the fact is the 5.03 million annual sales pace in August compares poorly to the 7.08 million annual rate the National Association of Realtors reported in 2005, when the economic collapse was still years away. And the median price of previously owned homes also hit $168,300 in August, down 5.1 percent from the same month last year.

But even that price decline sounds like good news here because it means home prices are getting closer to sustainable levels that will create greater fluidity in a market that has been thoroughly and distressingly stagnant. That stagnation is a clear bottleneck to the sort of growth the NRF report suggests.

“Sales of existing homes, which account for about 90 percent of total home sales in the U.S., are an excellent gauge of the demand for housing and, most importantly, economic growth,” said Mario Moreno, economist at The Journal of Commerce. “Home sales have a multiplier ripple effect throughout the economy mainly because of two reasons: It provides income for the realtor and stimulates consumption opportunities for the buyer.”

Retailers certainly expect to see those opportunities ripple through their stores. They only need carriers across the supply chain to see the same opportunities.

Paul Page is executive director of The Journal of Commerce. He can be contacted at 202-355-1170, or at ppage@joc.com. Follow Paul Page on Twitter, www.twitter.com/paulpage.
 

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