Sunday, October 18, 2009

Ships arriving high in the water

Guambat was amused at the "cause du jour" cited last week by newsbites to "explain" the purely technical drive to the 10k round number (see chart here). On that occasion, Oct 14th, the newsbite was that, while consumer spending was still speeding to a stop, it was speeding slower than expected, therefore time to buy, buy, buy. E.g.:

WRAPUP 2-U.S. retail sales hint consumer demand improving

Sales at U.S. retailers fell in September as car-buying incentives expired, but excluding autos they were up a second straight month, raising cautious optimism consumer spending could support economic recovery.

Retail sales fell 1.5 percent last month, the biggest decline since December, after surging by a revised 2.2 percent in August, the Commerce Department said.

Sales excluding motor vehicles rose by a bigger-than-expected 0.5 percent, building on a 1 percent increase in August and beating economists' expectations for a 0.2 percent gain.

The increase cemented the view that consumer spending recovered and the economy started growing in the third quarter after the worst U.S. recession since the 1930s.

'There's solidity, or new strength, in all discretionary spending categories,' said Pierre Ellis, senior economist at Decision Economics in New York. 'We evidently have hit the bedrock level of consumer spending and can even see a little bit of normalcy going forward.'
Yadda, yadda, etc., and so on.

The consumer was also being resuscitated by falling energy costs, according to some cheerleaders:
Lower Energy Costs Point to U.S. Consumer Rebound: Chart of Day Oct. 14 (Bloomberg) -- Falling energy costs may trigger a U.S. consumer-spending revival that’s faster and stronger than most people anticipate, according to James W. Paulsen, chief investment strategist at Wells Capital Management.

The ratio [percentage of disposable income spent on energy] dropped to 4.4 percent in this year’s second quarter from a peak of 6.3 percent in the third quarter of 2008. The latter reading was the highest since 1985....
Of course, in 1985 the unemployment rate was almost 3 points lower, at 7% and trending downward from its decade high of 10.8% in 1982. (Look at this "misery" index chart of unemployment for the last six decades.) With unemployment trending up, it is hard to get excited about a fall in energy costs as a boost to consumer spending.

A more sober assessment of the state of the consumer was presented by, albeit a few days before that "unexpected" -- and questionable -- slowing of decline in spending:
The U.S. trade balance deficit tightened by $1.2 billion to $30.7 billion in August. The drop in the deficit was unexpected as the consensus forecast the deficit to rise to $33.0 billion.

The drop in the deficit was not necessarily good news for the U.S. economy as it shows the U.S. consumer is still holding back on increasing their spending.

The depreciation of the dollar against all major currencies was expected to help U.S. export growth. We saw evidence confirming that a low dollar value would boost exports in 2007 Q4 and 2008 Q2.

Unfortunately, global demand for U.S. goods remains extremely weak and the relative price gain for U.S. importers was not enough to spur an increase in purchases.

As a result, exports remained virtually flat in August. The entire tightening in the trade balance was due to a decline in import demand.

The drop in imports was unexpected.
Corroborating the drop in imports is the high-riding movement of the goods transporters on the high seas, a sea-faring theme Guambat has alluded to frequently in recent weeks.
Imports dive at ports of Los Angeles and Long Beach

In another sign of how deep the global recession has become, the ports of Los Angeles and Long Beach on Friday [Oct. 16th] reported their worst combined import statistics for September in nine years.

September is often the busiest month at the nation's biggest port complex, making it one of the best barometers of the health of the economy and international trade.

The port of Los Angeles received 309,078 containers packed with imported goods in September, representing a decline of 16% from the same month last year and 27% from September 2006, L.A.'s best month ever for imports. Long Beach received 224,924 import containers in September, a drop of 19% from a year earlier and 32% from September 2007, the port's best September ever.

For the first nine months of the year, imports, exports and empty containers through the port of Los Angeles were down 16% at just under 5 million containers while the Long Beach port saw a decline of nearly 25% at just under 3.7 million containers, compared with the same period last year.

As dismal as those figures are for the two ports, which rank first and second in the U.S. in container volume and together rank fifth in the world, a greater worry goes beyond the immediate and substantial loss of local trade-related jobs: Some of the ports' most important tenants were so poorly positioned for the downturn that they might sink completely in a sea of billions of dollars of red ink, experts say.

"Without a doubt, the Southern California ports should be worried," said Neil Dekker, an analyst at Drewry Shipping Consultants in London who produces container industry forecasts. "Companies will go bust; freight rates may take years to recover."

The rest of the story is just as, if not more, gloomy as the part excerpted.

Anyone looking to a Santa sleigh recovery this year is sledding on thin ice.

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