On the brink of change

Despite dropping oil prices resulting from excess supply and lower demand, output continued with the excess crude going into storage tankers and land-based facilities. The dry bulk market is also caught between excess capacity and weak demand as is the container sector.

Economic change is in the air but the signals are mixed as to which direction the change will take. The fundamentals are mixed: inflation remains at or near zero – a good thing – but consumer demand is not picking up and showed a negative trend in the first quarter. Similarly, the Purchasing Managers’ Index (PMI) in the Eurozone and in China has dropped and is stagnant in the US.

Business confidence in the US was unchanged at 51.5% in April of 2015, while growth of the Eurozone manufacturing sector was maintained in the same month, with the rate of expansion easing only slightly, held up primarily by export orders. However, despite being in positive territory of above 50.0 it is nowhere near its 2010-11 levels of just below 60.0. Meanwhile, the inventory-to-sales ratio took a major leap upward to levels not seen since the recession. One can only hope that this was due to the West Coast port labour dispute.

Germany reported expansion in April, but its overall rate of improvement slowed slightly over the month. German manufacturers saw weaker growth of output, new orders and new export orders. France, on the other hand, saw its industrial output fall. Its output fell at its fastest pace for four months, following a sharper decrease in new order inflows. In Asia, China reached its lowest PMI levels in 12 months, falling to 49.2 which implies a recession.

The trend in container volumes has also brought a mixed result. Europe was relatively strong in 2014 despite the weak GDP growth figures. US and North European import volumes are projected to exhibit lower growth this year compared with 2014.

At the end of the day, it all comes down to the consumer as he stands on the economic brink and decides whether things will get better or worse. Will he consume or save?