The world’s strongest economy is entering its sixth year of lackluster trade growth, the world’s largest export manufacturing economy has turned inward, crude oil hovers at $40 per barrel yet production remains high, and more, ever larger container ships are on order as carriers report quarterly losses and pursue consolidation. Is there, in fact, a “new normal” in global trade?
The 6 percent Asia-U.S. cargo growth expected for 2015 reflects timing of holidays and cargo disruptions during the initial months of West Coast port congestion. Early estimates of accelerating growth in 2016 are already being adjusted downward. The National Retail Federation lowered its 2015 growth forecast for retail containerized imports — the core of the Asia-U.S. trade lane — to 3.7 percent from an earlier estimate of 4.1 percent. The 2016 numbers should improve somewhat, with inventory restocking.
By most measures, the U.S. economy is healthy, but not necessarily by past measures. Unemployment is low and wages are up, but more jobs are part-time and/or temporary; services inflation, especially in health care and technology, co-exists alongside consumer goods discounting; and spending overall focuses on durable goods, necessities, values and deals. Millennial consumers favor spending on shared experiences within social groups rather than on products. Household formation remains slow, even as baby boomers downsize. Business spending remains sidelined by uncertainty.
Add to this China’s planned transition from an export economy to one of domestic consumption served by indigenous industries. Weaker demand in the U.S. and Europe for Chinese exports, plus mounting debt and misallocated capital in the property and banking sectors, has slowed annual GDP growth to less than 7 percent. Declining exports mean declining imports of raw commodities and inputs — a double hit for China’s worldwide suppliers, including developing Asia and U.S. exporters already hurt by a strong dollar.
Whatever 2016 brings, a return to pricing sanity and/or continuing consolidation, the market is clear. Something has to give.
Brian Conrad, Executive Administrator, Transpacific Stabilization Agreement; Westbound Transpacific Stabilization Agreement