Sea Container Counts Continue to Warn Economy Slowing in May 2012

Written by Steven Hansen

Using a similar lead sentence from last month, container counts are continuing to show the economy is struggling to make headway.   The economically intuitive imports are down 2.5% year-over-year and up a meager 0.1% year-to-date. There is a direct linkage between imports and USA economic activity.

Even exports (which are an indicator of competitiveness and global economic growth) are  flat (0.0%) year-over-year – but up 1.1% year-to-date.

There is reasonable correlation between the container counts and the US Census trade data also being analyzed by Econintersect.

Econintersect considers import and exports significant elements in determining economic growth (please see caveats below). On a month-over-month basis, exports grew 1.0%, while imports declined 5.3%.

So far other major transport indicators are mixed but the April / May data released so far is showing weak to no to negative 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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4 replies on “Sea Container Counts Continue to Warn Economy Slowing in May 2012”

  1. In looking at the difference between export and import container shipments, how much (if any) weight is being assigned to currency effects, or are you just looking at raw numbers?

  2. No weight to currency effects – we are not counting the dollar value of the containers, but just counting the number of containers.

    What we are trying to do is correlate import and export data using a count that occurs over a month ahead of US Census trade data. This is important because the import side has a direct correlation to USA economic growth. There is a pretty good correlation between trade data and container counts – so this data is giving us a one month look ahead to trade data.

    Econintersect tends to emphasize transport pulse points – as by their very nature are looking at the consumer economy several months from now.

    note that trade data tracks the consumer side of the economy. if economic growth (or contraction) is caused by other sectors (business or government) – trade data will not give a heads up.

    right now, trade data (via container counts) are telling us that the economic growth is continuing to slow through the end of May.

  3. Looking at your numerous helpful transport posts and some other things I get the picture that intermodal rail and truck transport are up, inventories aren’t building, but container counts are flat over the last eight months. The flatness in container counts is corroborated by shipping rates http://www.bloomberg.com/quote/CTEX2500:IND/chart are flat. Class 8 retail sales are also up and transport companies reported record shipments in 1q12.

    Putting all of that together I get the impression that Americans are buying and selling more stuff and moving it around the country, but it’s not Chinese imports that are getting bought and sold. It could be due to drilling and pipe laying activity from the natural gas shale boom, it could be automobiles purchases, I am not sure what it is but whatever it is it’s good economic activity. Dollars spent on this type of economic activity get re-spent and resonate through the economy much better than a dollar spent at WMT on an imported consumer item does.

  4. Taymere,
    good summary. yes, the puzzling part of container counts is that they are not correlating to rail intermodal (total container counts flat while intermodal counts up). normally, rising fuel costs add enough to transport costs to favor more local production (e.g. USA manufactured goods). the rail data is railcar counts (not rail miles) – so this is difficult to validate.

    in any event, combining what i see between truck and rail – the economy is expanding, but at a lower rate than 4 or 5 months ago.

    steven

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