Hackett Associates Global Trade Pulse points to mixed economic signals in the U.S. and Europe

The August edition of the “Global Trade Pulse” from global maritime and trade consultancy Hackett Associates pointed to mixed signals on the global trade front for North America and Europe, respectively.

This is the second edition of the report, which made its debut in July. Hackett officials described report as a short-term index that offers up “the sentiment for trade at a glance,” akin to other key economic metrics like the PMI and Consumer and Carrier confidence indices, while providing access to specifically see where a group of economic indicators are in relation to trade for the current month, too.

In terms of how data and information within the Global Trade Pulse is compiled, Hackett explained it models container trade for both North America and Europe, which accounts for 67 percent of global trade, according to data from Container Trades Statistics. What’s more, Hackett noted that the East-West focus of the Pulse “represents the large majority of developed world consumer demand,” and that “planning for the immediate future will be easier and…will provide improved clarity to current events.”

Hackett observed in the new report that China’s economy has lost steam, with actual growth falling short of targeted rates, while the United States most recent second quarter GDP reading at 3.7 percent outpaced expected targets, even though it was negatively impacted by gains in manufacturing and retail inventories.

As for Europe, the report cited how recent gains in Manufacturing and Retail PMIs hit recent highs in August. But enthusiasm for those gains is tempered, due to what Hackett described as “far too many political issues and economic problems…waiting in the wings for there to be much optimism.” And it added that one main reason for that is because European imports are underperforming in a weak economy, and exports are outperforming economic fundamentals, due in part to a weak Euro and the possibility of a “Grexit” giving the market pause.

North American data: The report’s North America Import Pulse for August was flat compared to July at 114.8 (2012=100) and is up 1.6 percent compared to August 2014. And imports for the month of June, the most recent month for which data is available, slipped 0.5 percent from May and rose 8.5 percent compared to June 2014. On the export side, the reports North America Export Pulse for August was down 3.8 percent compared to July while showing an 0.8 percent annual gain. North America June exports at 99.3 were 5.7 percent below May and down 3.6 percent annually.

Hackett Associates Founder Ben Hackett said in an interview that despite better than expected GDP growth in the U.S. and mild retail sales gains, a still too high inventory-to-sales ratio remains a concern.

“It is high and not budging,” he said. “And it is really high when looking at it compared to recent years. If the U.S. economy was not growing so rapidly, it would possibly signal a recession, but it is not the case even with the imbalance in the inventory-to-sales ratio. Part of the problem looks to be the ongoing increase in online sales purchases taking place, which is catching retailers off balance a little bit and impacts different types of sourcing.”

European data: The Europe Import Pulse in the report at 107.5 was down 0.6 percent sequentially in August and down 1.3 percent annually. And June European imports at 111.1 saw a 5.2 percent dip from May and a 6.9 percent annual slide. The Europe Export Pulse at 110.9 was down 0.1 percent from July to August and up 5.1 percent annually, with June European exports up 1.5 percent from May to June at 119.4 and up 10.3 percent annually.

China impact: The recent push by the Chinese government to devalue its dollar, the Yuan, will hurt exports out of Europe, with the Chines making their own exports more competitive, coupled with a lack of demand for exports out of Europe, said Hackett.

“We are seeing European exports to China dropping rapidly,” he said. “And given China’s position within the European economy it is more cautious in its purchases. China is a big issue at the moment.”