Thursday, April 16, 2009

Port activity may be slowly coming to a bottom.....

Commercial and industrial vacancy rates are surging amid the precipitous decline in economic activity and tight credit conditions. The chart illustrates vacancy rates for commercial (office space) and industrial activity since the last recession; both have surged since the beginning of 2008.

The surging vacancy rates incorporate partly the stalled port activity due to the sharp retrenchment in global trade. But some encouraging signs are emerging: port activity may have seen its bottom. From the LA Times:
Port officials are hoping they have seen the worst.

"One month isn't much of a benchmark for us, especially a month like March when things are historically slow," said Laurie Kellman, spokeswoman for the Port of Los Angeles. "But the numbers were up compared to last month, and that is an encouraging sign."

But observers are still chronicling a lot of distressing numbers.

According to AXS Alphaliner, the Paris-based maritime consultant that tracks the world's largest shipping lines, about 10% of the world's container ship fleet was idle as of this week because the ships had no cargo. While the number represented a slight improvement over recent weeks, it was still more than twice as high as the industry's last slump in 2002.

Another maritime industry think tank, London-based Drewry Shipping Consultants, noted that four container lines failed in late 2008 and predicted that 2009 probably would bring more business collapses. Drewry said the industry would have to cut capacity sharply to shore up freight rates, including canceling some of the biggest new ships on order, even if it meant losing prestige and substantial down payments.

In the U.S., some of that tracking is done by Waltham, Mass.-based IHS Global Insight, which follows traffic at the largest seaports in North America on behalf of the National Retail Federation. IHS Global Insight said Wednesday that traffic at those ports was expected to be 21% lower during the first half of 2009 than it was in the first half of 2008, which had come in as the slowest cargo year since 2004.

"The good news is that we've already seen the bottom for the year, and month-to-month numbers are already starting to climb," National Retail Federation Vice President Jonathan Gold said. "We're still going to see double-digit declines compared with last year, but the size of the gap is starting to narrow."
VP Gold's statement (in bold) is rather strong, given the tenuous state of both the US and our major trading partners' economies. But nevertheless, the good news must to come from the bottom up: port activity, then revenues, then jobs or investment...something like that.

Growth in port activity would signal that trade is slowly emerging from the depths. And as the article highlights, the most direct impact will be felt by workers, as a bottom in the decline in port activity would likely pass through as a slowdown in the rate of job loss.

However, based on the Fed's Beige Book assessment on nonresidential activity, these vacancy rates are expected to rise.

Rebecca Wilder


  1. But exports are still falling in places like Singapore, China, South Korea? This is the time that fall and back-to-school stuff would be coming through the ports so it might reflect some optimism that buyers will be out later in the year. Hope.

  2. Hi Janie,

    I agree. A bottom is probably not the best use of words (Gold's comment); however, it is consistent with a slow in the rate of decline.

    But that is a good point - the article doesn't discuss seasonal variations!

    It's good to hear from you!!!


  3. Economic statistics are all ex-post. But it is still mathematically impossible to miss an economic forecast. Even my mentor questioned this.

    Monetary lags are always of the same length, e.g., one for real-gdp & one for inflation, etc. So monetary flows (MVt) become ex-ante.

    Bernanke et al. don't know this. Anderson went so far as to say that a close correlation should be expected.

    It must take some of the fun away from guessing.


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