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January 18, 2024–U.S. containerized imports are up slightly at the start of 2024, but experts are uncertain about the remainder of the year, due to concerns they have about weather, geopolitics, labor negotiations and consumer spending.

Their leading concern is whether the national economy is headed for a so-called soft landing, a period of reduced inflation absent a recession and unemployment, or a landing that is a little harder, one that adversely impacts consumer spending.

David Silverman, Senior Director of Fitch Ratings, thinks the days of the “resilient” consumer could be over, adding that it’s been “a surprise” for the consumer to be this healthy over the past few years and stronger headwinds are on the way.

HEADWINDS AND TAILWINDS

“We’re thinking a lot about the tailwinds that the consumer has enjoyed dissipating to a large extent and a sense of real rising headwinds,” Silverman said.

“Rising debt levels, reduced consumer savings, rising interest rates impacting ongoing monthly payments, the compound impact of inflation over the last several years, the advent of college loan repayments that started over the last couple of months. While we still think the consumer fundamentally is healthy, we do think they are softening.”

Jack Kleinheinz, Chief Economist for the National Retail Federation (NRF), believes the nation’s labor market is likely to soften in 2024, tempering consumer expectations for employment and wage growth which will affect spending decisions and imports.

“Spending is elevated relative to current income, and maintaining the recent pace of growth will be increasingly difficult,” said Kleinholz, who noted that a key question in the outlook is what the U.S. Federal Reserve (Fed) will do with interest rates.

THE FED HOLDS STEADY

The Fed seems happy enough with the current direction of the economy and has no set timetable on changing the nation’s interest rates, now in the 5.25%–5.5% range, according to Tom Barkin, President of the Federal Reserve Bank of Richmond.

“Is inflation continuing its descent and is the broader economy continuing to fly smoothly?” he said, adding that “conviction” on both questions will determine the pace and timing of any changes in rates.

The Fed is hoping to achieve a 2% rate of inflation, but most recent figures show that inflation hit 3.4% on an annual basis in December. That was higher than economists had expected and seemed to vindicate the Fed’s caution over cutting rates anytime soon.

“The airport is on the horizon. But landing a plane isn’t easy, especially when the outlook is foggy, and headwinds and tailwinds can affect your course,” he said.

“It’s easy to oversteer and do too much or understeer and do too little,” he said. “There’s no autopilot. The data that come in this year will matter.”

FIRST QUARTER SOFTENING

Industry analyst Descartes meanwhile said the January statistics it is currently tracking show container import volume consistent with “seasonal import patterns”—code for a normal downturn after the holiday season.

But the firm also warned of “signs that global supply chain performance will be under pressure in 2024 because of the conditions at the Panama and Suez Canals and upcoming labor negotiations.”

The NRF, which represents thousands of shippers across the country, also expects the nation’s inbound cargo to “slow” during the first quarter before resuming a growth trend in the spring.

Jonathan Gold, NRF Vice President for Supply Chain and Customs Policy, characterized this lull in throughput as the “traditional” slowdown when the supply chain gets a “break” after the busy holiday season.

The NRF predicts imports of 1.92m twenty-foot equivalent units (TEUs) in January, a year-over-year increase of 6.1%, before the slowdown for the rest of the quarter.

It puts February at 1.76m TEU, up 13.8% year over year, and March at 1.7m TEU, up 4.7% from last year. April will see an uptick at 1.79m TEU, and May even higher at 1.92m TEU.

NEW CHALLENGES COMING

But Gold cautioned that “there’s always a new challenge on the horizon” and that “attacks on cargo ships in the Red Sea” have created “volatility” in retail supply chains.

Ben Hackett, principal of Hackett Associates, said East Coast ports would “most likely” be adversely affected by the Red Sea situation if an increase of their Asian cargo is diverted to the West Coast ports for shipment eastward on intermodal rail.

Such diversions from the East and Gulf coasts also could arise due to shipper concerns over current labor talks between the International Longshoremen’s Association (ILA), representing East and Gulf coast dockworkers, and their employers’ representative, the United States Maritime Alliance (USMX).

Those shipper concerns were voiced in a letter to the ILA and USMX by NRF President Matthew Shay who wrote that the 2023 uptick in cargo along the East and Gulf coasts could be at risk if contract talks do not resume soon.

“The East and Gulf coast ports certainly gained from the recent protracted West Coast labor negotiations,” Shay wrote. “Adding the potential for a coastwide disruption from the labor negotiations could lead retailers and other businesses shifting away from the East and Gulf Coast ports.”

There’s much to ponder as the year unfolds. Without a doubt there will be both tailwinds and headwinds in the coming months. But the best advice in either case seems to come from the Fed’s Barkin: “Buckle up. That’s the proper safety protocol even if you expect a soft landing.”