The elusive recession, not as per definition yet

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Expectations of a recession are receding, despite declining demand, as economies remain in growth territory.

Capacity management is to the fore in container shipping providing some stability but major ports have to contend with declining throughput

All the signs in late 2022 suggested that the largest economies of the EU and the US would enter into a mild recession sometime in the second half of 2023 with this driven by stubbornly high inflation, rising interest rates intended to choke oﬀ demand, and grain and energy price rises resulting from the on-going war in the Ukraine. Add to this, the financial sector in the US is a real cause for concern, evidenced by banks coming under pressure. So far, we have seen three banks being taken over, including Credit Suisse in Europe.

Also on the negative front, we have seen a very sharp drop in demand for consumer goods moving in containers with, for example, North American imports down by 24 per cent in the first quarter, year on year and Europe by nearly 30 per cent.

Furthermore, with weak demand in the dry bulk sector global trade looks anemic.

This suggests that a recession is on the way in Europe and North America, but lo and behold, it appears to be elusive with GDP growth rates stubbornly staying out of the “traditional” definition of a recession with two quarters of negative growth.

Despite the above indicators China, the US and the EU continue to see their economies growing, albeit slowly in some cases, as unemployment remains stable and investment in industries is holding up as energy prices have dropped and profit margins (perhaps fuelling inflation) are healthy.

Forecasters are coming to the view that a recession may be avoided, and that consumer goods consumption will recover by the second half of the year. The shipping sector, usually the first to bemoan the collapse in trade volumes, has been somewhat sanguine so far despite some very large drops in revenue and profits in the first quarter of this year. The reason for that is that despite the collapse of freight rates, the container sector has so far managed capacity and kept rates above pe-covid days and is still seeing solid returns. Less solid are the results of the major ports as they face declining throughput.

We are all holding our breath.