Coming Down the Pike: a slight pause in throughput?

LONG BEACH, September 9 – Volumes of freight entering the country seem to be slowing down according to retail experts, who predict that imports at the nation’s major container ports are expected to fall below last year’s levels for the remainder of 2022.

“Consumers are still buying, but the cargo surge we saw during the past two years appears to be slowing down,” said Jonathan Gold, Vice President for Supply Chain and Customs Policy for the National Retail Federation. 

The NRF sees a 6.3% decrease in imports between August 2022 and January 2023 versus the past six months (February through July), compared to a 0.1% dip between the same two periods of last year. 

The NRF forecasts the import volume in the second half of 2022 to decrease by 2.3% versus the equivalent period of 2021, with 14.29m twenty-ft equivalent units (teu), the standard measure for containers. It puts the import volume for 2022 at 29.47m teu, a slight 1.3% increase over 2021. 

Such numbers could play into national concerns of a recession looming on the horizon, an event that could send the country’s supply chain industry into a tailspin – assuming there were to be a recession.

Not necessarily a recession

But there are people who doubt that worst-case scenario, saying that the US economy might be in something closer to a stall than a recession. In terms of the shipping industry, the declining freight volumes point to what one analyst simply calls the “non-peak” season.

“This is really a non-peak season because for the first time ever, volumes moved in the second half are lower than those moved in the first half,” said Peter Sand, chief analyst at maritime-data provider Xeneta. 

While Mr Sand pointed to a lot of “uncertainty” due to the continued war in Ukraine and the global economic downturn, there are other factors to consider when looking at the phenomenon of the “non-peak” season.

In fact, Mr Gold pointed to one himself by saying that “cargo volumes are solidly above pre-pandemic levels, but the rate of growth has slowed and even slid into negative numbers compared with unusually high volumes last year.”

In a word, the downturn – if that is what we are to call the current stall in buying – really depends on what you’re comparing it with. In Mr Gold’s statement, note the key phrase concerning “unusually high volumes last year.”

Port stats show progressive growth

Statistics from the Port of Los Angeles, the nation’s largest gateway, illustrate the point. Simply taking the inbound figures for every month of July over the past decade, it’s possible to show numerous ups and downs in throughput  but all against a background of progressive increases.

Over the ten-year period, the Port of Los Angeles has seen 4,195,998.55 teu of imported containerized cargo in the months of July, for an average of 419,599.86 teu per month.

In July 2022, it saw 485,452.25 teu of imports, representing 15.69% above the ten-year average, while July 2021 had 469,360.85 teu or 11.86% above average. Even July 2020, a low point in the developing pandemic, had 456,028.20 teu, or 8.68% above the ten-year average.

In fact, to find the Port of Los Angeles at anything under the average of 419,599.86 teu per month, one would have to go all the way back to 2016, when the gateway saw 368,696.85 teu or 12.13% below the 10-year July average.

It goes without saying that past trends do not necessarily portend future developments. In a word, just because the Port of Los Angeles has averaged 419,599.86 teu per July over the past decade, there’s no guarantee the trend will continue.

GDP and GDI show no recession

However, what could be a dip in imports does not entail a drop off the cliff either. The key question regarding the current and projected dip is how to interpret it: does the dip represent just a slight “correction” in the market or does it mean the market is headed into a recession?

As the NRF puts it: “The direction of the economy is difficult to ascertain.” 

Robert Gordon, a Northwestern University professor and longstanding member of a committee at the National Bureau of Economic Research, which dates the beginning and end of recessions, told The Wall Street Journal that, “the economy is stagnating, but it’s not declining.”

There are two ways to measure economic output, either by gross domestic product (GDP) or by gross domestic income (GDI). Whenever someone spends one dollar on a good or service, another person earns a dollar of income for making or delivering that good or service. GDP measures the spending side of the equation, while GDI captures the income side.

During the first half of the year GDP contracted at a 1.1% annual rate, while GDI expanded at a 1.6% annual rate, the paper reported. Looking at a current average of GDP and GDI, Mr. Gordon said, “You couldn’t call this a recession at all.”

In a word, incoming cargo volumes may fluctuate in the coming months, but they are not dropping off a cliff.

PHOTO: Container ships at the Port of Los Angeles. © Cargomatic