August 20, 2014 by Bill Johnson
Holiday presents are en route to U.S. retailers, and the supply chain is hinting at stronger November-December sales this year than last.
While inbound-container volume at the Los Angeles and Long Beach, California, ports fell a combined 0.7 percent in July from a year earlier, it rose almost 13 percent the prior month, according to data compiled by Bloomberg. In February-July, the increase averaged 7.1 percent, compared with 3.4 percent in the 2013 period. That longer-term pace of activity reinforces a forecast of “rather robust” sales, according to Charles Clowdis, managing director of transportation advisory services at IHS Global Insight in Lexington,Massachusetts.
Retailers have tried to get many products into ports earlier this year, partly because of the prospect for a good selling season. Some companies also timed shipments in anticipation of a possible dockworker strike, Clowdis said. Several large retailers already have signed contracts with carriers to assure trucks are available during the busiest weeks leading up to the holidays, he said, adding that a shortage of available drivers could be an influence. He declined to identify the businesses involved.
“The fact that some companies are so concerned about capacity suggests we’ll have a much better holiday season than in the past few years,” Clowdis said. Such an improvement is consistent with the “economic recovery we’ve been experiencing this year.”
Retail sales — excluding automobiles, gasoline and spending at restaurants — will grow 4.2 percent in November and December on a non-seasonally adjusted basis compared with a year ago, according to Chris Christopher, director of U.S. macroeconomics and global consumer markets at the IHS economics unit. This would be stronger than gains of 3.1 percent in each of the past two years, he said.
Los Angeles and Long Beach ports account for almost 50 percent of all U.S. container imports, according to Todd Fowler, transportation analyst and director in Cleveland with KeyBanc Capital Markets Inc., the investment banking arm of KeyCorp.
Tracking their inbound activity for July-October provides “a good read of the U.S. economy” ahead of the holidays, said Walter Kemmsies, chief economist for Moffatt & Nichol Inc., a Long Beach-based infrastructure-advisory company. Planning began as many as 18 months ago for cargo arriving onshore now, which suggests retailers have confidence “consumers are likely to open their wallets a little more this year.”
A.P. Moeller-Maersk A/S (MAERSKB)’s Maersk Line, which transports about 15 percent of the world’s containers, raised its full-year profit forecast on higher freight volumes and lower costs. Global container demand is gaining momentum as economies gradually improve, and net operating profit after tax will “significantly” exceed last year’s $1.5 billion, the Copenhagen-based company said yesterday.
September historically has been the peak month for shipments, so June’s surge is early, Kemmsies said.
July’s “soft patch” could be followed by another month of subdued container volume, Fowler predicted. Even if shipments return to modest growth this fall, it’s important to track other components of the supply chain to gauge whether there’s a merrier Christmas ahead.
“You want to see port, truck and railroad volumes moving in sync,” Kemmsies said. Watching intermodal shipments — products sent by more than one means of transportation — can provide “confirmation that there a lot of goods coming through the ports.”