December 2012 Sea Container Counts Foretell Slow Growing Economy

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This month’s container data is tainted as the busiest ports in the USA (Port of Long Beach and the Port of Los Angeles) were on strike between 27 November and 04 December. Although the ports were not completely closed down, they operated at 1/3 capacity. Ships either waited to unload, or moved to alternate ports.

How much of the improvement this month in imports was attributable to offloading November containers in December, and how much of the decline in exports was due to shippers using alternate ports?  However, if one combines November and December data, there is little question that imports were stronger in the last two months of 2012 versus 2011.
A summary of container counts for 2012:
  • traffic has been pulsing for most of 2012 – one good month, one bad month;
  • imports for 2012 were up 0.9% over 2011;
  • exports for 2012 were down  0.9% over 2011 – the decline was caused by the last two months having terrible data.
For the month of December, the economically intuitive imports are up 4.6% year-over-year (versus last months -3.2%), and up 7.9% month-over-month. There is a direct linkage between imports and USA economic activity – and growth in imports foretells real economic growth (albeit weak growth).

Exports (which are an indicator of competitiveness and global economic growth) are down 7.5% year-over-year (versus last month’s -2.4%) – and up 0.3% month-over-month.  A collapse of exports would normally be saying the global economy is weakening – but with the strike at the ports, it is hard to draw any conclusion.

There is reasonable correlation between the container counts and the US Census trade data also being analyzed by Econintersect. But trade data lags several months after the more timely container counts.

Unadjusted Year-over-Year Change in Container Counts – Ports of Los Angeles and Long Beach Combined – Imports (red line) and Exports (blue bars)

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Econintersect considers import and exports significant elements in determining economic health (please see caveats below).

Unadjusted Import Container Counts – Ports of Los Angeles and Long Beach Combined

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Unadjusted Export Container Counts – Ports of Los Angeles and Long Beach Combined

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So far other major transport indicators are mixed but the December data released so far is showing weak growth:
For container counts, only import counts are USA economically intuitive. Using transport as an economic barometer – the real economic growth in the USA seems to be on a two month strengthening binge (two months is not a trend).

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.
There is a good correlation between container counts and trade data (the US Census trade data is shown on the graph below). Using container counts gives a two month advance window on trade data.

Inflation Adjusted Year-over-Year Change Imports (blue line) and Exports (red line)

The overall transport started of the year strong, and weakened through mid-year. One month is not a trend, but it appears transport may again be strengthening.

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.

Above graph with current data:

Imports of Goods and Services

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).