LOOKING FOR DARK CLOUDS

LOOKING FOR DARK CLOUDS

''The Perfect Storm'' is one of the summer's hit movies. Unique special effects build the suspense as the sea and the sky unleash their power on a swordfishing boat, the Andrea Gail. The film is based on an actual storm off New England in 1991 that raised its fury with little warning.

I am truly not a pessimist, but am keeping an eye out for any signs of dark clouds forming over the U.S. economy.

Before you get alarmed, the consensus among forecasters for the next couple of years is for a cyclical soft landing - slower economic growth but no recession. The Economist Intelligence Unit, a sister company of The Journal of Commerce, predicts real gross domestic product will grow about 5 percent this year and 3 percent next year. Morgan Stanley Dean Witter economists are slightly more bullish, though they project a similar step down in output in 2001.

''Our macroeconomists still give the forecast of moderate growth more than a 50 percent probability,'' said Paul Bingham, vice president of WEFA Group, an economic consulting firm, and director of its World Trade Services. He added, ''We are raising the caution flag a bit higher due to the recent increases in petroleum prices, wages and interest rates.'' Paul also cautioned that America's bill for foreign purchases is mounting. ''We enjoyed four-plus years of non-stop gains in inbound trade volume without a markup in import prices. The bargain days are over. Imported goods prices are rising because of the competition from hungry buyers in a rebounding Asia market.''

Federal Reserve Chairman Alan Greenspan held off on another interest rate increase last month, most likely to see what trailing effect there might be from the six consecutive rate hikes of the past year. In his June 30 Internet commentary, Stephen Roach, chief economist for Morgan Stanley Dean Witter, said he believed the economy would temporarily have to settle down to a 2 percent to 2.5 percent growth rate to curtail the job market enough to slow inflation. The Fed then could say it won the game.

So indeed the economic storm may blow over without much damage. What effect will there be on trade? I looked back a half dozen years for some clues. Following the decade's slow start, the U.S. economy quickly heated up, and by 1995-96 rode the roller coaster back down to a 2 percent to 2.5 percent GDP growth rate. No recession occurred, but the container trade from Asia flattened out in both years and the trans-Atlantic westbound TEU volume fell 3 percent.

As we enter the peak importing season for the holidays, my unscientific poll shows the mood is positive. Some NVOs lament that they can't get enough inbound space. That story has not changed from last year. You can't blame the carriers. Any open slots are like gold and the ocean carrier will steer them to their own (more profitable) customers. I have heard a few forward-looking transporters mumbling about the chances that retail stores will become overstocked - a real storm cloud for trade.

Are we in for a repeat of 1995? ''Not likely,'' argues Mike Fusillo, director of PIERS Maritime Research Services. ''The Fed is still in the hot seat but the market seems to be reacting as expected. We will see import volume gains decelerate to single digits after the summer,'' he said.

''It's already evident in housing-related trades. Higher interest rates are slowing homebuilding, which is cutting into imports of materials like lumber and tiles. White goods (appliances) and e-goods (televisions, etc.) are next.'' PIERS' latest forecast of container imports calls for a 6 percent volume gain this year, after 1999's impressive 12 percent gain.

Ben Hackett, senior vice president for international services at WEFA, agrees that trade is not headed for a major slump. But, he adds, ''Last year's U.S. import boom is clearly unsustainable. We are projecting the growth in the value of imports at a bit stronger than 10 percent this year, moderating to 6 percent in 2001. Volume gains, especially in inbound containers, will be slightly lower.''

I'm going to vote with the optimists this time. Back in the early 1990s when I was a card-carrying economist, I forecast an even worse downturn in U.S. container imports! I was wrong then because I missed an important shift in the international trade winds -- in particular, the increased use of ''intrafirm trade'' -- the movement of goods across borders by multinational companies. In 1994, intrafirm trade accounted for one-third of American imports, excluding services, and 40 percent of exports. The integration of the global economy created the opportunity for intra-company trade to reduce distribution costs, acquire inputs more efficiently and be insulated from any one economy's fluctuations.

I am sure that today intrafirm trade has grown in importance, and helps explains why trade volume is not likely to suffer from even a small slowdown in the world's largest economy. If that's not enough, my children are already hinting about preferred Christmas gifts, so I'm sure I'll be doing my share to empty retail shelves. I have already put a copy of ''The Perfect Storm'' video on my list.