Logistics and business news: Despite encouraging signs, experts point to an extended economic recovery
Jeff Berman, Group News Editor -- Logistics Management, 10/14/2009
NEW YORK—Even though there have been various reports indicating that the economy is “stabilizing” and the recession is abating, it appears that a true economic recovery will take several more months to materialize, according to industry experts.
A look at recent economic indicators suggests a “mixed bag,” when it comes to gauging how things are going.
For example, the United States Department of Commerce reported today that September retail sales—including automobiles, gas stations and restaurants—were down 1.5 percent in September following a 2.2 percent increase in August. And the National Retail Federation (NRF) reported today that September retail sales—excluding automobiles, gas stations and restaurants—were up 0.5 percent in September from August but down 1.5 percent year-over-year.
The NRF also recently announced that it predicts 2009 holiday sales will decline one percent to $437.6 billion. The NRF noted that this decline is well below the ten-year average of 3.39 percent holiday season retail sales growth but is better than last year’s 3.4 percent decline and is not as severe as the projected 3.0 percent annual decline in 2009 retail sales.
As has historically been the case, consumer spending remains the main driver of the domestic economy—accounting for roughly two-thirds of all economic activity. And based on sluggish retail numbers, coupled with the lack of a meaningful uptick in freight volumes, analysts have told LM it may take nine months until a true recovery takes hold.
But the news is not all bad, as evidenced by some other economic indicators, including:
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the Cass Freight Index showing a 2.8 percent gain in shipments from August to September;
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2.1 percent increases in the American Trucking Associations tonnage index in August and September;
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the Institute for Supply Management’s manufacturing index topping 50.0 percent (which indicates positive growth) for the last two months; and
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the United States trade deficit falling 3.6 percent to $30.7 billion in August.
“In general, things are positive, especially the ISM index which suggests manufacturing is picking back up,” said Eric Starks, president of freight transportation forecasting firm FTR Associates, in a recent interview. “We have been looking for stabilization in the economy and have seen things stabilize in the last three months as the economy has hit the bottom.”
Starks added there are a lot of “positives” out there, with evidence that things may have slowly started to turn the corner. But he cautioned that it is premature to determine if enough has happened, adding that the dent the recession had made in the economy requires a lot to happen over the next six-to-nine months, as well as the fact that recent positive economic signs have yet to translate into a rebound in freight demand.
This lack of a rebound in freight demand is reflected in data released this morning by Panjiva, an online search engine with detailed information on global suppliers and manufacturers.
Panjiva’s data indicates that from August to September the number of global manufacturers shipping to the U.S. fell by 5 percent, following a 1 percent dip from July to August. This August to September dip is consistent with 2008, which was down 7 percent, and 2007, which was down 4 percent. Panjiva also reported that the number of U.S.-based companies receiving waterborne shipments was down 4 percent in September.
“There is certainly a seasonal component to what we are seeing with this data,” said Josh Green, Panjiva CEO. “Global trade has been operating at a relatively light level, and we were all hoping the 2009 holiday season would drive an uptick in trade. The expected seasonal downturn is disappointing.”
Green added that part of what is happening with this data is that there is a level of caution from businesses as they look ahead to the holidays that do not want to have too much inventory on hand like last year. Now, he said, businesses would rather have too little inventory until consumer sentiment is consistently positive and gives businesses reason to ratchet up buying activity.
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