November 2011 Container Shipments Not Good

In November 2011, import containers have contracted year-over-year in the Ports of Los Angeles and Long Beach. This is the sixth month in a row of contraction.

Exports (which are an indicator of competitiveness and global economic growth) contracted for the first time since August 2010, and is the second month in a row of significantly “less good” data.  This may be the first evidence of a global economic downturn – however, one month of negative data (or two months of “less good” data) is not a trend.

Both Imports and Exports contracting year-over-year at the same time sends a shiver down my spine.

Econintersect considers import and exports significant elements in determining economic growth (please see caveats below). On a month-over-month basis, exports decreased 5.2%, while imports increased 3.0%.  On a year-over-year basis, exports decreased 1.9%, while imports decreased 3.6%.

So far other major transport indicators are showing meager growth:

The Ports of LA and Long Beach account for much 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 is expressing the volume of containers is TEU – which is the volume of a standard 20 foot long sea container. So a standard 40 foot container would be 2 TEU.

The transports are saying the USA is weak. Only imports are indicating a contracting economy – while rail is now weakly expanding and diesel usage is not growing. The message may be mixed, but declining import data continues to be a serious warning indicator of economic contraction.

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 good 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 business 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, the consumers and business 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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