SEA ISLAND, Ga. -- A maritime industry economist said the U.S. economy is most likely in a recession now and this will result in declining imports in 2008. Bill Ralph, senior economist at R.K. Johns & Associates, said retailers will be practicing inventory control because they do not want to order too much merchandise at a time when consumers are cutting back on spending. Ralph, who addressed the annual Georgia Foreign Trade Conference, noted that some economists believe an economic recession is still a year away while others say the United States can avoid a recession altogether.
As far as ports and shipping lines are concerned, however, business conditions look very much like a recession. U.S. containerized imports in 2007 increased around 3 percent, compared to 11 percent in 2006 and average annual growth of 7 percent over the previous decade. The U.S. in December created only 18,000 new jobs. “If it stays that way, we’re definitely in a recession,” Ralph said. A weak housing market will make economic conditions even worse and will have a direct impact on merchandise imports. Declining home values mean consumers have less equity, and referring to a statement by former Federal Reserve Chairman Alan Greenspan, Ralph said 50 percent of equity in homes is spent on consumer goods. This is bad for imports, especially from North Asia, which accounts for 58 percent of U.S. imports.
Of added concern is the likelihood that home prices will have to decline further before they become affordable for many Americans. Home prices declined 2 percent last year, but they will probably have to drop another 15 to 20 percent in order for sales to pick up, Ralph said. In addition to buying fewer consumer products, Americans are also “buying down,” he said. Consumers who were shopping at the most expensive department stores are shopping at mid-priced stores, while those who were shopping at mid-priced retailers are doing more of their shopping at discount retailers. East Coast ports should not let the current economic conditions deter them from deepening their access channels and building larger marine terminals to accommodate the large vessels that will call there when the Panama Canal is enlarged in mid-decade. Ralph said 8,000-TEU vessels will be calling at East Coast ports by 2016 and 10,000-TEU ships will arrive by 2021.
Journal of Commerce
