No cause for optimism

The world’s major economies are struggling to keep out of recession according to the technical definition of two quarters of GDP decline. The U.S. has managed avoid officially being designated as in recession, as has the struggling UK, but only just. The once mighty German economy is technically in a very mild recession which is causing much debate about how to bring the economy back to its once consistently strong growth. China also has issues with economic growth below five per cent.

Taking the old GDP measure as an indicator of the economy today has little to guide us in the near-term future and maybe not even over the longer term as economists are beginning to tell us. I have always been critical of using GDP growth as a means of looking forward for 12 months. What we are seeing in the figures published by various countries economic institutions is that there is hardly a twinkle of growth underlying economic activity as consumers struggle with high inflation in foodstuffs and services leaving little room for expenditure on the nice things to have, consumer goods.

As we look at the volume of import trade on the three big head-haul routes it is very clear that there is a problem with growth. There isn’t any! It is virtually all negative except for the odd hiccup such as the Panama Canal water crisis which is causing cargo to bei off-loaded on the U.S. West Coast instead of on the East Coast. This is a leading indicator of bad things to come as retailers are still trying to get rid of high inventories of unwanted goods.

Carriers continue to introduce new capacity, particularly the larger vessel sizes over 20,000 TEU capacity, adding to their headaches of sharply declining revenue as freight rates have collapsed in line with declining import demand in North America and Europe. Freight rates across the major trading lanes have continued their downward trend. Most carriers have managed to avoid losses, but the pressure is on to hold on to the little positive that is left. Ports and terminals are also feeling the pinch as a result.

Perhaps if you are on vacation, extend the time away!