JOC Uncharted: IHS Markit research chief predicts sluggish US import recovery

JOC Uncharted: IHS Markit research chief predicts sluggish US import recovery

Carriers are responding to continued year-over-year declines in US imports by blanking sailings in the eastbound trans-Pacific. Photo credit: Shutterstock.com.

It is unlikely that consumers will lead a resurgence in imports later this year as they continue to contend with the economic impact of the coronavirus disease 2019 (COVID-19), warned Rahul Kapoor, the global head of commodity analytics and research at IHS Markit. 

Carriers have recognized this trend and are responding by reducing capacity in the US import trade with Asia, said Rahul Kapoor, a former Bloomberg analyst. Supply and demand are “in sync,” Kapoor told JOC Uncharted on Wednesday. 

US imports from Asia plunged 18.5 percent in May from May 2019, and year-to-date imports from Asia are down 9.2 percent according to PIERS, a JOC.com sister company within IHS Markit.

Merchandise imports in the eastbound trans-Pacific, the largest US trade lane, vary by retailer. Big-box retailers that remained open during the COVID-19 lockdowns because they sold essential as well as non-essential goods generated strong volumes, Kapoor said.

“The other end of the spectrum is the retailers that are a little more traditional, and maybe the mid-range folks, who’ve really moved rapidly to turn down their orders, cancel orders, really constrict their supply chains in a significant way,” he said.

US retail and food services sales declined 16.4 percent in April, following an 8.3 percent drop in March, according to the latest IHS Markit’s Retail Trends report. “Core retail sales declined sharply, and more than expected,” the report stated. GTA Forecasting, a JOC.com sister company within IHS Markit, projects a 7.6 percent year-over-year decline in US imports from Asia this year, with imports forecast to increase 8.3 percent in 2021 from the prior year.

Slow recovery is forecast

April was likely the low point for retail sales now that many stores are reopening across the country, but the consumer merchandise that dominates the US import trade from Asia is expected to grow slowly for the rest of the year. 

“A rapid and uniform recovery is unlikely. High-frequency data and consumer attitude surveys suggest that shoppers will remain cautious after stay-at-home orders are lifted. Permanent business closures and job losses will keep retail spending subdued for months,” according to the Retail Trends report.

IHS Markit projects that retail sales and food services in 2020 will decline 11.3 percent. “The forecast calls for retail sales to increase incrementally throughout the remainder of the year, with sales not surpassing their pre-COVID-19 level until mid-2022,” according to the report.

In a Port of Los Angeles update to stakeholders Wednesday, Gene Seroka, executive director, said total container volume in May at the largest US container port was down 30 percent from May 2019. The spring fashion season did not happen this year, and back-to-school retail sales will be compromised because the outlook for a return of students to classrooms is still uncertain, he said.

Blank sailings reflect weak import volumes

Carriers responded to the decline in containerized imports by canceling 40 sailings to Los Angeles-Long Beach in the first quarter, with another 23 blank sailings taking place in Q2, Seroka said. Only 60 vessel calls took place in May, compared with 89 ship calls in May 2019, he said.

Seroka expects the impact of COVID-19 on consumer demand, and the devastating effects of the two-year-old US-China trade war, will continue to be a drag on liner services from Asia this summer. Although ports, carriers and their retailers do not have full insight into late summer-fall import volumes in the eastbound trans-Pacific, he said the trade is bracing for what is likely to be a “little uptick” in volume this peak season.

“Any notion of a recovery in shipping is a little premature,” Seroka said.

The June Global Port tracker, published monthly by the National Retail Federation and Hackett Associates, forecast US imports will decline 12.9 percent in August, 11.3 percent in September, and 7.9 percent in October from the same months last year. 

Contact Bill Mongelluzzo at bill.mongelluzzo@ihsmarkit.com and follow him on Twitter: @billmongelluzzo.