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There
have been recent signs the US economy may be
stabilising after a deep dive, offering hope a
recovery could be on the horizon. But US import
numbers still paint a grim picture and few
economists or transport industry executives are
banking on a recovery in the level of goods
coming into the United States without consumers
regaining some of their old shopping habits.
Consumer spending has in recent years
contributed about 70 per cent of US gross
domestic product. When the economy is booming
that means a lot of consumer goods are sucked in
from overseas but when demand slips, imports
tend to suffer.
'What will drive imports is the US consumer,'
said Jim Young, chief executive of No 1 US
railroad Union Pacific Corp. 'We're not
optimistic that consumers will start spending
again in the near term.' Like the other major US
railroads, Union Pacific hauled a growing number
of containers full of consumer or finished goods
when the economy was stronger - shipments
referred to as 'intermodal' as they use
standardised containers that can be interchanged
between ship, truck and train.
But with the downturn, containerised trade has
plummeted.
Union Pacific reported a 23 per cent
first-quarter drop in intermodal shipments.
Indeed, the speed, scope and scale of the US
decline after the collapse of Lehman Brothers
last fall - which nearly took down the financial
system with it - has been breathtaking, with
stunning first-quarter freight declines.
'February is generally not a good month, but
this year it was awful,' said Mike Keenan, head
of harbour planning and economic analyst for the
Port of Los Angeles, which together with the
Port of Long Beach makes up America's largest
port. In February, container traffic at the port
fell nearly 33 per cent from a year earlier.
While Los Angeles port saw a daily average of 16
container ships in 2008, that fell to 13-14 a
day in February.
According to Paris-based shipping consultant AXS
Alphaliner, the drop in containerised trade has
left around 10 per cent of the global container
ship fleet idled.
But there are signs the economy could be near a
bottom.
For instance, container traffic at the Port of
Los Angeles in March was down slightly under 10
per cent from a year earlier.
A modest recovery in consumer spending in the
first quarter after it collapsed in the second
half of last year may have helped.
'There is always a slight seasonal uptick from
February to March,' Mr Keenan said, 'but the
March numbers show a real improvement from
February.' One piece of data generating some
optimism was the Institute for Supply
Management's March index of new orders in
manufacturing, which stood at 41.2. The index
has to be above 50 to show economic growth, but
March was vastly better than December's index of
23.1.
'We're slowly seeing some industries move toward
growth,' said Norbert Ore, head of the ISM
manufacturing survey.
But the possibility of America's economy being
near the bottom does not necessarily mean a
recovery on the waterfront is that close.
IHS Global Insight forecasts containerised
imports at US and Canadian ports down 20 per
cent in the eight months to the end of August,
with declines slowing to 9 per cent by December.
'The slower pace of decline will be due partly
to having a lower base to grow from,' said
Andrei Roudoi, international trade forecasting
manager at IHS Global Insight, 'but also to
slight improvements in the economy.' Growth may
be slow returning because this is a global
recession. In localised recessions a country can
export its way to health, but Simon Johnson, a
senior economist at the Peterson Institute for
International Economics, said this downturn was
pernicious because there is nowhere to export
to.
IHS Global Insight forecasts global
containerised trade will fall 5.8 per cent in
2009 and is predicting declines in every region
around the world.
'I'm not sure if Mars is open for business,' Mr
Johnson said, adding that growth once the
economy begins to come out of the recession will
be subpar.
What would make a real difference is if the US
consumer - the engine of the global economy -
started shopping again, creating orders for
manufacturers in other countries.
Uri Dadush, a senior associate at the Carnegie
Endowment for International Peace and former
director of international trade for the World
Bank, said that when the recovery comes it could
be fairly robust as stock markets and house
prices could rise quickly from their lows,
creating a 'virtuous circle' that would boost
consumer confidence.
'But it could go either way,' Mr Dadush said.
'It's marginally more likely we'll get a
recovery this year or in 2010. But it's also
entirely possible we end up deeper in the hole.'
But James Pressler, an economist at Northern
Trust, argues that 'deleveraging' by
overextended US consumers - cutting back
spending while boosting savings - is likely to
be a lasting phenomenon.
Consumers who took on too much debt and now find
their houses are worth less than they paid for
them or have big credit card bills to pay off,
are going to be prudent about how they spend.
Those who have lost their jobs or fear they
could only add to the cautious sentiment.
'Those exporters relying on the once vibrant US
consumer should start looking for a new market,'
Mr Pressler said. 'This side of the Pacific is
not going to be as friendly as it used to be.'
'It is going to be hard times for the West Coast
ports,' he added.
Source: Reuters
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