Despite near-term volume declines, Port Tracker calls for first half gains

Even with expected import cargo volume declines in the coming months, the Port Tracker report by the National Retail Federation (NRF) and maritime consultancy Hackett Associates expects volumes to be up for the first half of 2016.

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.

“Retailers are carefully managing their inventories but still need to stock up on seasonal goods for spring and summer,” NRF Vice President for Supply Chain and Customs Policy Jonathan Gold said in a statement. “Comparisons with last year are difficult because of the surge of cargo after problems at West Coast ports ended, but we think consumers will continue to increase their spending this year and retailers will be ready.”

For December, the most recent month for which data is available, total volume was 1.43 million Twenty-Foot Equivalent Units (TEU), which was off 3.4 percent compared to November, as most holiday-bound merchandise is already in the U.S. by then, and also off 0.8 percent annually.

Volume estimates for the first two months of the first quarter are pointed higher than what is considered typical, due to low volumes caused for the same period a year ago, which was just prior to when a new West Coast port labor agreement was reached. As previously reported, the combination of West Coast port labor issues, which led to congestion, hindered port production and throughput from late 2014 into the first quarter of 2015 are expected to result in atypically high annual comparisons before returning to a more normalized rate in April, according to Port Tracker.

January was estimated at 1.46 million TEU for an 18.3 percent annual gain, and February is at 1.39 million TEU for a 16.2 percent annual increase. March is expected to be off 22.4 percent at 1.35 million TEU, as March 2015 was when a large amount of backlogged cargo moved upon resolution of the West Coast port labor situation. April marks a more normalized month, with the report calling for volumes to be down 1.2 percent at 1.49 million TEU. May and June are slotted at 1.57 million TEU (for a 2.6 percent decrease) and 1.55 million TEU (for a 1.2 percent decrease), respectively, and the first half of 2016 is expected to hit 8.8 million TEU for a 4.5 percent annual gain.

Despite a growth forecast for the first half of 2016, Hackett Associates Founder Ben Hackett was dour in his view of the global economy, explaining in the report that economic signals are increasingly suggesting the global economy could be headed for a recession if nothing is done to prevent it. He said that a downturn would be closer to the one in 2001 rather than the Great Recession in 2008, even though NRF is calling for employment and wage growth in 2016.

Global signals of economic malaise cited by Hackett included:
-slowing factory output in China over the last ten months, coupled with surveys out of Asia suggesting industries are struggling with weak demand and lack of assistance from state stimulus efforts;
-a lack of real economic growth in the Eurozone with high unemployment levels;
-declining global commodity prices for crude oil and most major bulk commodities; and
-slower than expected 2015 U.S. retail sales and minimal GDP growth

“Governments around the globe need to support economic policy that is pro-growth and avoid actions that get in the way of the business community,” Hackett wrote in the report. “This is not the time, for example, for the U.S. Federal Reserve or other central banks to increase interest rates. What all the economies of the world need is stimulus to encourage consumer spending and to increase business expansion.”

In a previous interview, Hackett said there are a few different things to focus on when looking at current import levels.

“Consumer confidence has decreased and is a concern at some level,” he said. “The inventory-to-sales ratio, manufacturing PMI, and savings rate gains in tandem with increased credit card activity are the things to keep an eye on. It is a mixed bag of economic fundamentals, with nothing definitive saying things are going well or going badly.”

With the report expecting more normalized import flows by next April, Hackett said that is contingent on inventory levels coming down, with the assumption that they should.