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March 2012 Sea Container Data Shows Economy Soft

Written by Steven Hansen

Container counts are showing the economy is struggling to make headway as the all important imports are up a measly 0.1% year-to-date.  There is a direct linkage between imports and USA economic activity.  And the only reason for this positive growth is that March year-over-year growth was up 12.9% to offset February’s contraction of 12.7% (contraction likely caused by Asian holidays in February).

Even exports (which are an indicator of competitiveness and global economic growth) are at record levels yet only up 2.1% year-to-date.

There is little sign that the economy is growing stronger.

Econintersect considers import and exports significant elements in determining economic growth (please see caveats below). On a month-over-month basis, exports declined 2.3%, while imports increased 25.7%. On a year-over-year basis, exports increased 12.9%, while imports increased 2.5%.

So far other major transport indicators are mixed but the February data released so far is showing weak growth:

The Ports of LA and Long Beach account for much (approximately 40%) of the container movement into and out of the United States – and these two ports report their data significantly earlier than other USA ports. Most of the manufactured goods move between countries in sea containers (except larger rolling items such as automobiles). This pulse point is an early indicator of the health of the economy.

Containers come in many sizes so a uniform method involves expressing the volume of containers in TEU, the volume of a standard 20 foot long sea container. Thus a standard 40 foot container would be 2 TEU.

The overall transport message is painting a mixed economic picture – and Econintersect would not bet yet that a full blown economic recovery is yet in play.

Caveats on the Use of Container Counts

These are extraordinary times with historical data confused by a massive depression and significant monetary and fiscal intervention by government. Further containers are a relatively new technology and had a 14 year continuous growth streak from 1993 to 2006. There is not enough history to make any associations with economic growth – and we must assume a correlation exists.

Further, it is impossible from this data to understand commodity or goods breakdown (e.g. what is the contents in the containers). Any expansion or contraction cannot be analyzed to understand causation.

Imports are a particularly good tool to view the Main Street economy. Imports overreact to economic changes much like a double ETF making movements easy to see.

Contracting imports historically is a recession marker, as consumers and businesses start to hunker down. Main Street and Wall Street are not necessarily in phase and imports can reflect the direction for Main Street when Wall Street may be saying something different. During some recessions, consumers and businesses hunkered down before the Wall Street recession hit – and in the 2007 recession the contraction began 10 months into the recession.

Econintersect determines the month-over-month change by subtracting the current month’s year-over-year change from the previous month’s year-over-year change. This is the best of the bad options available to determine month-over-month trends – as the preferred methodology would be to use multi-year data (but the New Normal effects and the Great Recession distort historical data).

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