Economy takes toll on U.S. container traffic
Container volume growth at West Coast ports is off sharply from earlier projections, based on the first five months of the year, and could end the year relatively flat compared to 2006, according to a transportation analyst.
“Right now we’re looking at a growth rate that’s looking a lot like the recession year of 2001,” Scudder Smith, a principal in the consulting division of infrastructure services giant PB (formerly Parsons Brinckerhoff), said Tuesday during a presentation to the International Trade Data Users conference in New York.
Six years ago TEU growth was under zero compared to 1.3 percent growth through May 2007 at major West Coast ports. The Port of Tacoma, for example, is down 4 percent from last year. Some analysts are predicting that total TEU volume will rebound once the peak season kicks in this summer as stores build up inventory for the back-to-school and holiday shopping seasons. Smith said that the slowdown in containerized imports is related to the downturn in the housing market and consumer spending.
Some categories of merchandise that are closely linked to home sales, such as furniture imports, are off significantly this year.
Smith also drew attention to the high correlation between transpacific trade growth and outsourcing. The short-term flattening of TEU growth eventually could evolve into a longer-term phenomenon as U.S. manufacturers reach the end of available production lines they can shift overseas.
“A big chunk of that growth was exporting jobs from the U.S., Mexico and Canada to China. How much outsourcing can continue?” he told Shippers’ Newswire.
The toy and electronics industries, for example, are gone. Apparel is nearly finished as a domestic industry.
“The game is over in a lot of these cases. In order to continue that growth you have to continue that outsourcing, but at some point the outsourcing ends,” Smith said.
Econometrics firm Global Insight recently revised its U.S. TEU import growth forecast for 2007 to about 5.5 percent from 6.5 percent, because the economy is down more than expected due to high fuel prices, and slow automobile and housing sales. Standard container volumes grew 8.3 percent in 2006, continuing the hot pace of the previous five years. During that period West Coast container volumes increased about 10 percent per year, dipping to 7.5 percent in 2006.
According to the more recent update from Global Insight, the top 10 ports nationwide handled 1.3 million TEUs in April, down from the same month a year ago. Volume in May is estimated at 1.35 million TEUs (down 1.2 percent from May 2006), June is forecast at 1.4 million TEUs (down 0.2 percent), and July at 1.48 million TEUs (up 6 percent).
Although export volumes are growing this year (year-over-year Census numbers for April showed exports in goods and services up $12.8 billion compared to $8.9 billion for imports), the increase is off a smaller base and is not enough to offset the decline in imports. The number of empty containers shipped back to Asia is also down, although those figures aren’t included in the forecasts for loaded containers.
“Something’s going on, but we’re not sure what it means,” said Paul Bingham, a principal at Global Insight, on the sidelines of the conference.
U.S. national income rose 0.6 percent in the first quarter, but most analysts expect the economy to pick up in the second half of the year. Whether the increase will offset the first quarter decline to meet projections of about 2.5 percent growth in Gross Domestic Production is unclear.