Despite lower import levels, Port Tracker report says holiday inventory levels are strong

Following two straight months of record-breaking imports at United States-based retail container ports in July and August, things slowed down a tad in September, with ample inventory levels in place for the holiday shopping season, according to the most recent edition of the Port Tracker report issued today by the National Retail Federation (NRF) and maritime consultancy Hackett Associates.

The ports surveyed in the report include: Los Angeles/Long Beach, Oakland, Tacoma, Seattle, Houston, New York/New Jersey, Hampton Roads, Charleston, and Savannah, Miami, and Fort Lauderdale, Fla.-based Port Everglades. Authors of the report explained that cargo import numbers do not correlate directly with retail sales or employment because they count only the number of cargo containers brought into the country, not the value of the merchandise inside them, adding that the amount of merchandise imported provides a rough barometer of retailers’ expectations.

For September, the most recent month for which data is available, U.S.-based retail container ports covered in the report handled 1.76 million TEU (Twenty-Foot Equivalent Units). This was down from August’s 1.8 million TEU, which is the highest-volume import month recorded since the NRF started tracking imports in 2000 and tops the previous record set one month earlier in July of 1.78 million TEU. Prior to July and August, the previous high was 1.73 million TEU from March 2015. On an annual basis, September volumes were up 10.5%.

“The stores and warehouses are full, and it’s time for the shopping to begin,” NRF Vice President for Supply Chain and Customs Policy Jonathan Gold said in a statement. “Retailers have been bringing in merchandise since late summer, and supply is ready to meet the increased demand that has been building throughout the year. At this time of year, it’s important to remember the role imports play in making the holidays affordable for American families and the millions of U.S. jobs behind every product on the shelf regardless of where it is made. Our nation needs to avoid trade wars and other misguided trade policy that would drive up consumer prices or cost American workers their jobs.”

Port Tracker estimated that October will come in at 1.75 million TEU for a 4.9% annual gain, and it added that even though neither September and October are not record months got volume, they are two of only six months that monthly volume has hit 1.7 million TEU or more, going back to when NRF initially began covering imports in 2000.

And looking further out, the report expects November to be off 0.5% annually at 1.63 million TEU, with December up 2% at 1.6 million TEU, January down 1% at 1.66 million TEU, February up 10.9% at 1.59 million TEU, and March off 2.1% at 1.5 million TEU.

NRF recently came out with an updated forecast indicating that 2017 retail sales are expected to be up between 3.2%-3.8%, with 2017 holiday sales, which are comprised of retail sales for November and December, expected to be up between 3.6%-4%. Total 2017 volumes are expected to hit 20 million TEU for a 3.3% improvement over 2016’s 18.3 million TEU, which is the current all-time high.

Hackett Associates Founder Ben Hackett wrote in the report that 2017 has turned out to be a boom year for growth in import cargo volume at U.S. ports, although still in single figures. And it reflects strong growth in spending by U.S. consumers.

Looking ahead, Hackett explained that it is not likely that the “cargo boom” is not likely to continue into next year, citing his firm’s models showing a slowdown in the rate of growth, even though it does not see a decline in volume, nor a recession, calling it instead a time out for a breather, which he said is supported by some current weakness in domestic industrial production.

In an interview with LM, Hackett pointed to consumer optimism as the primary driver for the strong import levels heading into the holiday season.

“Consumers, for whatever reason, think things are improving dramatically,” he said. “They are dipping into savings to spend, with personal consumption is well above real personal income. There seems to be a feeling of optimism about where the economy is going, with the expectation that the bull market and good times will continue to roll on.”

In his editorial, Hackett commented that the peak shipping season for imports from Asia is now over, with some cancelled sailings following in November, adding that this weakness will continue as the inventory-to-sales ratio remains high, while noting that on the positive side it is unlikely there will be any shortages for the holiday sales period.

“What we are seeing in regards to the inventory-to-sales ratio is a real shift in how it is structured,” he said. “More and more, the major importers are holding stocks into the U.S. rather than relying on the transportation and logistics services providers to bring goods in.  Consumers are demanding next-day delivery, and the only way to do that is to have the right amount of stock next to the demand center. More retailer regional distribution centers are popping up in the U.S. and there is a lot of expansion on that front. It is really a shifting of where the goods are. Looking at the ratio over the last year or so, it has stayed up. It is not because of any type of recessionary or logistics reasons. It is because consumers are now more demanding.”