“Global Trade Pulse” reflects supply chain inventory glut concerns

West Coast imports rose 2 percent compared to October, which came at the expense of both the East and Gulf Coasts

By Jeff Berman, Group News Editor

January 25, 2016

Various global economic concerns and trends made their presence felt in both North America and Europe, according to the most recent edition of the “Global Trade Pulse” from global maritime and trade consultancy Hackett Associates.

Hackett officials describe the report as a short-term index that offers up “the sentiment for trade at a glance,” akin to other key economic metrics like the PMI and Consumer and Carrier confidence indices, while providing access to specifically see where a group of economic indicators are in relation to trade for the current month, too.

In terms of how data and information within the Global Trade Pulse is compiled, Hackett explained it models container trade for both North America and Europe, which accounts for 67 percent of global trade, according to data from Container Trades Statistics. What’s more, Hackett noted that the East-West focus of the Pulse “represents the large majority of developed world consumer demand,” and that “planning for the immediate future will be easier and…will provide improved clarity to current events.”

North American data: The report’s North America Import Pulse for November at 112.3 (2012=100) was down 6.1 percent compared to October and up 0.9 percent annually. The North America Export Pulse at 107.0 was down 2.2 percent compared to October and down 1.5 percent compared to November 2014. November imports for North America at 111.4 were down 5.8 percent sequentially and up 6.0 percent annually, with exports––at 97.2––up 0.1 percent sequentially and down 0.1 percent annually.

Looking at imports, Hackett said that West Coast imports rose 2 percent compared to October, which, it explained, came at the expense of both the East and Gulf Coasts, while its exports saw a 1 percent gain that came at the expense of the East Coast.

Hackett Associates Founder Ben Hackett said in a recent interview that despite better than expected GDP growth in the U.S. and mild retail sales gains, a still too high inventory-to-sales ratio remains a concern.

“It is high and not budging,” he said. “And it is really high when looking at it compared to recent years. If the U.S. economy was not growing so rapidly, it would possibly signal a recession, but it is not the case even with the imbalance in the inventory-to-sales ratio. Part of the problem looks to be the ongoing increase in online sales purchases taking place, which is catching retailers off balance a little bit and impacts different types of sourcing.”
And he explained that the continuing rise of the average inventory-to-sales ratio is not good as it suggests that both retail sales and industrial production are not as high as they should be.

“It seems to me that consumers are putting more money into savings,” he said. “If the ratio goes up again in December and January then I cannot see anything else than a recession.  I am more pessimistic than most commentators on this subject.”

Hackett added that continuing cancellation of carrier calls and strings supports his firm’s view and that of the index in that that traffic volumes are slowing down and impacting GDP and economic output.

European data: The Import Pulse for Europe at 104.9 was off 1.9 percent sequentially and down 2.8 percent annually, and the Export Pulse at 113.0 fell 0.3 percent sequentially and rose 5.9 percent annually. European imports in November at 98.3 saw a 5.8 percent decrease compared to September while falling 5.3 percent annually, and exports for the same period at 107.9 were off 5.9 percent sequentially and off 5.6 percent annually.

The nearly 6 percent drop in the Import index marked the first time it has been below 100 since March 2015.
In the report, Hackett cited various drivers for the uncertain global economic outlook, including:

-the IMF downgrading global growth predictions for 2016 and 2017, driven by continuing problems with China’s economic rebalancing, fall in commodity prices, rising U.S. interest rates, and slow growth in Europe;
-volatile global stock markets; and
-the collapse of global oil prices

“The big question we face is whether this is just a short term panic that is driving the economic fundamentals into the red or are we headed for a recession similar to 2001?” the report said. “Our view is that the collapse of confidence in the markets is causing the global consumers to put their money into savings rather than spending it? What we are seeing is fundamental change in the way that the global economyreacts to political and financial instability. Gone are the days of heady consumerism, replaced by a more cautious approach to spending and a distrust of institutions. The economy can either go into a recession or a mild recovery but we should forget about strong growth. The probability in our view is 50:50.”