Walter Kemmsies, chief economist of Moffatt & Nichol, said Thursday he is forecasting import cargo volumes in the peak season this year could be 5 percent higher than in 2012, but cautioned the economic outlook is cloudy because of government policy uncertainty.
One of several speakers at the Port of Long Beach’s annual Pulse of the Port Peak Season Forecast, Kemmsies indicated 2013 GDP growth forecasts range between 0.4 percent and 4.4 percent. As a result import container volumes could grow by as much as 12 percent or fall 6 percent.
“We are seeing a dynamic feedback, a reinforcement of consumer spending driving employment higher, because as people buy more cars and homes and retail goods, the companies need to hire more people to produce these goods. This has been in effect for about a year, year and a half,” said Kemmsies.
But he cautioned if the Federal Reserve reverses policies, the nation’s economy could see a slowdown.
Kemmsies said he thinks there is a likelihood of a slowdown by 2015, but expects it will be a mild contraction compared to the Great Recession of recent years.
He also said the growth of the middle class in many countries around the world presents opportunities for U.S. businesses and ports “need to be on your toes to support exports as well as imports.”
Kemmsies said last year U.S. container volumes are still below the 2007 peak. Exports were disappointing in 2012, he said, down 0.4 percent, primarily because of the drought that affected the corn harvest, but also because of slowing economies in Europe and Asia.
He said it was still a very good result considering the global economic backdrop and predicted better growth in 2013 for ports, with imports doing better than exports. He said the U.S. economy is leading world economic growth for the past 18 to 24 months for the first time since 1999.
Kemmsies noted the percentage of people turning 65 and older is skyrocketing. Just 5 percent in 2005, it is rapidly moving to 15 percent and will climb to more than 20 percent by 2020. He said this “grey tsunami” means imports will not grow very quickly.
As China’s economy becomes more driven by domestic demand, it is likely other countries, including those in Southeast Asia and Mexico, will be the source of more U.S. imports, he said.
Jonathan Gold, vice president supply chain and customs policy at the National Retail Federation (NRF), said his organizations was predicting 3.4 percent growth in 2013 compared to 4.2 percent in 2012. He said holiday sales were up 3 percent, lower than the 4.1 percent projected.
Gold said his organization is predicting container volumes, which were 15.8 million TEUs, up 2.9 percent in 2012, will grow 3.2 percent in 2013. NRF projects volumes will grow faster on the West Coast—3.6 percent, and 2.6 percent on the East Coast.
Labor issues—both the fractious contract negotiations between the between the International Longshoremen’s Association and the strike by longshore clerical workers that shut down the Ports of Los Angeles and Long Beach for eight days—were “very tough on the shipping community, both importers and exporters,” he said, as many companies were continually doing contingency planning.
Gold made a plea when the International Longshore and Warehouse Union and Pacific Maritime Association begin to negotiate a new contract to replace the agreement that expires next year they “remain at the table and continue to work and get a contract done. Having disruptions that impact the economy are just not worth it.”
John McLaurin, president of the Pacific Merchant Shipping Association, said sequestration is already affecting the ports of Los Angeles, Long Beach and Hueneme,
“Customs has eliminated overtime work, which has already forced some adjustments at marine terminals. Next month the agency has provided notice that they will be furloughing 10 percent of the employees, which will compound the problem,” he said.
“If the furloughs are implemented, we expect delays in clearing ships and moving cargo off the docks and it could put Southern California ports at a disadvantage as no other ports operates as long hours or relies on Customs agents as much,” he warned.
McLaurin expressed concern about rising costs, highlighting the cost of clean air regulations in California and a proposal by the California Association of Port Authorities for an annual general rate increase. He said the cost increases would be “automatically imposed without debate or regard to the state of the industry or the financial need of the ports. A competitive state and its ports need to show the customers that their business is valued and not simply treat them like an ATM machine.” – Chris Dupin
Government policy clouds outlook for port volumes in 2013
