Sea Container Counts Confirm Slowing U.S. and Global Economies

Written by Steven Hansen

Every week, I have been forecasting a slowing economy based on the significant decline in rail movements. This week I add sea containers and truck transport to the list. Transport overall is strongly suggesting the economy is slowing.

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The February year-over-year import/export container count growth was significantly weaker than last month, and year-over-year and year-to-date growth is now in contraction.

This container analysis is based on the Ports of LA and Long Beach which 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.

Consider that imports final sales are added to GDP usually several months after import – while the import cost itself is subtracted from GDP in the month of import.

	Acceleration Month-over-Month	Change from One Year Ago	Year to Date vs. Previous Year	Acceleration 3 Month Rolling Average	3 Month Rolling Average vs. Average One Year Ago
Imports	-11.0 %	-10.2 %	-4.6 %	-1.4 %	+2.0 %
Exports	-10.9 %	-14.2 %	-8.9 %	-0.9 %	-9.3 %

There is a reasonable correlation between the container counts and the US Census trade data also being analyzed by Econintersect. But trade data lags several months after the more timely container counts.

Also this week, the CASS Freight Index was released. The CASS index is a sampling of its client base which they state “the diversity of shippers and aggregate volume provide a statistically valid representation of North American shipping activity“.

Although truck shipping volumes are at high levels compared to most years since 2013, they are below 2018 levels for the first two months of 2019. The real eye-opener was a statement included in the CASS report:

The continued decay in the Cass Freight Shipments Index is beginning to give us cause for concern. When the December 2018 Shipments Index was negative for the first time in 24 months, we dismissed the -0.8% year-over-year decline as reflective of a tough comparison “because December 2017 was an all-time high for the month” and also because of “the stabilizing patterns we see in almost all of the underlying freight flows.” When January 2019 was also negative (down a mere -0.3%), we again pointed out that January 2018 was also an all-time high for the month and saw no reason to be alarmed about the overall economy. While we are still not ready to turn completely negative in our outlook, we do think it is prudent to become more alert to each additional incoming data point on freight flow volume and are more cautious today than we have been since we began predicting the recovery of the U.S. industrial economy and the rebirth of the U.S. consumer economy in the third quarter of 2016.

Contraction of transport year-over-year historically has been the leading indicator of a slowing economy. My usual caveat here is that there is still little indication of a recession on the horizon – just a lot of data pointing to a slowing economy.

Economic Releases This Past Week

The Econintersect Economic Index for March 2019 insignificantly declined and remains below territory associated with normal expansions. The question remains whether this downward trend will continue. Note, our index is built on data sets which were not affected by the government shutdown – and it is most likely that other recent economic forecasts you have seen fudged the missing data. A forecast with fudged data is simply a guesstimate.

The following table summarizes the more significant economic releases this past week. For more detailed analysis – please visit our landing page which provides links to our complete analyses.

**Other Economic Release Summary For This Week**
Release	Potential Economic Impact	Comment
February Sea Container Counts	confirms a slowing economy	The February year-over-year import/export container count growth was significantly weaker than last month, and year-over-year and year-to-date growth is now in contraction. Simply looking at this month versus last month – this was a weaker month. The three-month rolling average declined for imports but remains positive. The three-month rolling average for exports is deep in contraction year-over-year. Imports container counts give an indication of the U.S. economy’s state and the soft data continues to indicate a slowing economy. Exports are saying the global economy is weak as well as the dollar is too strong. Container data is consistent with other transport data indicating a slowing economy.
January Manufacturing	continues to indicate a slowing economy	US Census says manufacturing new orders improved month-over-month. According to the seasonally adjusted data, there was significant strength in civilian aircraft. The data in this series is noisy so I would rely on the unadjusted 3 month rolling averages which declined. Remember the headline numbers are not inflation adjusted.
March FOMC Meeting Minutes	Fed says the economy slowed	The Federal Open Market Committee (FOMC) – the board of directors of the Federal Reserve made no change to the federal funds rate as expected, and stated “that growth of economic activity has slowed from its solid rate in the fourth quarter … Recent indicators point to slower growth of household spending and business fixed investment in the first quarter.“ Overall the Fed appears to believe the economy weakened since the last meeting, will slow the unwinding of their balance sheet (Will Slow the Reduction of Its Holdings of Treasury Securities by Reducing the Cap on Monthly Redemptions from $30 billion to $15 billion).
February Leading Indicator	improved but forecasting a slowing economy by year-end	The Conference Board Leading Economic Index (LEI) for the U.S marginally improved this month – and the authors say “ the US LEI’s growth rate has slowed over the past six months, suggesting that while the economy will continue to expand in the near-term, its pace of growth could decelerate by year-end”.
American Trucking Association and CASS Truck Indices	????	Headline data for truck shipments showed that the American Trucking Association (ATA) tonnage showed continued strong year-over-year growth, but Cass said the year-over-year growth rate continues to contract. I tend to put a heavier weight on the CASS index which this month contracted year-over-year. On the other hand, the ATA index declined but remains strongly in expansion. One or both of these indices is reporting data from alternate universes. Econintersect tries to validate truck data across data sources. It appears this month that truck employment rate of growth continues to slow. Please note using BLS employment data in real time is risky, as their data is normally backward adjusted (sometimes significantly).
February Existing Home Sales	n/a	The headline existing home sales improved relative to last month with the authors saying “A powerful combination of lower mortgage rates, more inventory, rising income, and higher consumer confidence is driving the sales rebound”. The rolling averages for existing home sales have been slowing since the beginning of 2017. This month the rolling averages remained in contraction – but improved. Housing inventory is historically low for Februarys and the year-over-year growth slowed. Overall, this was better data than last month – but keep in mind that sales are contracting year-over-year.
January Wholesale Trade	slowing trend continues	The headlines say wholesale sales improved month-over-month with inventory levels worsening and very elevated. Overall, the rolling averages tell the real story – and they declined this month. This sector’s growth continues to trend down. This sector has little growth if one inflation adjusts the data. Inventory levels this month are at recessionary levels. Inventory levels this month are at recessionary levels.
Surveys	slowing trend remains	Philly Fed Manufacturing Survey – Although the survey index significantly improved, the key elements new orders and unfilled orders were little changed with new orders marginally improving and unfilled orders marginally declining. Overall, I do not consider this survey much different than last month when this index contracted.
Weekly Rail Counts	Definitely not positive news	Rail so far in 2019 has changed from a reflection of a strong economic engine to contraction. Currently, not only are the economic intuitive components of rail in contraction, but the year-to-date has slipped into contraction.