Executive Briefings

Recession Is Here, But What Will It Mean for Shippers and Carriers in the Coming Year?

Economic experts are finally acknowledging that the U.S. is in a recession. But they don't necessarily agree about the impact and duration of the crisis. Speaking on a market outlook panel at the TPM conference, Michael Andrews, chief economist of PIERS Global Solutions, predicted a "moderate rebound" in the second half of this year. The improvement will be driven by the government's fiscal and monetary stimulus efforts, he said. The dollar, which has been on a prolonged downward trend, should "stabilize and begin to firm in 2009," he added. At the same time, he sees no end in sight to the U.S. housing crisis, which has led to a severe credit crunch made worse by rising oil prices. Andrews expects continued growth, if somewhat less than last year, in emerging markets such as India, Russia and Brazil. China's economy, which chalked up growth of 11.4 percent in 2007, should grow by around 10 percent this year, he said.

Paul Bingham, principal economist with Global Insight Inc., agreed that the U.S. is in a recession, but said the world economy won't be in 2008. Still, the rate of growth in China will fall below 10 percent for the first time in 10 years, he predicted. "China's export engine is slowing," he said. And that will have a negative impact on other emerging economies. As for the trans-Pacific trades, he sees a continuing drop in U.S. imports from Asia, which were down 2.9 percent in terms of container volumes in 2007. "It's going to get worse before it gets better," Bingham said.

Even with less cargo moving in the Pacific this year, capacity should remain tight, said Trevor Crowe, senior container shipping analyst with Clarkson Research Services. The reallocation of container slots-down 4.5 percent in the trans-Pacific last year, versus a 21-percent rise between the Far East and Europe-coupled with slower vessel speeds and the growing use of space-hungry high-cube boxes, will keep the supply-demand balance from tipping in shippers' favor. In fact, member lines of the Transpacific Stabilization Agreement recently reported "early successes" in their efforts to boost rates for the coming contract season. The group predicts a net decline in trans-Pacific vessel space for the coming year, along with growth in freight traffic of between 2 and 5 percent.

Visit www.piers.com, www.globalinsight.com, www.crsl.com and www.tsa.com

Economic experts are finally acknowledging that the U.S. is in a recession. But they don't necessarily agree about the impact and duration of the crisis. Speaking on a market outlook panel at the TPM conference, Michael Andrews, chief economist of PIERS Global Solutions, predicted a "moderate rebound" in the second half of this year. The improvement will be driven by the government's fiscal and monetary stimulus efforts, he said. The dollar, which has been on a prolonged downward trend, should "stabilize and begin to firm in 2009," he added. At the same time, he sees no end in sight to the U.S. housing crisis, which has led to a severe credit crunch made worse by rising oil prices. Andrews expects continued growth, if somewhat less than last year, in emerging markets such as India, Russia and Brazil. China's economy, which chalked up growth of 11.4 percent in 2007, should grow by around 10 percent this year, he said.

Paul Bingham, principal economist with Global Insight Inc., agreed that the U.S. is in a recession, but said the world economy won't be in 2008. Still, the rate of growth in China will fall below 10 percent for the first time in 10 years, he predicted. "China's export engine is slowing," he said. And that will have a negative impact on other emerging economies. As for the trans-Pacific trades, he sees a continuing drop in U.S. imports from Asia, which were down 2.9 percent in terms of container volumes in 2007. "It's going to get worse before it gets better," Bingham said.

Even with less cargo moving in the Pacific this year, capacity should remain tight, said Trevor Crowe, senior container shipping analyst with Clarkson Research Services. The reallocation of container slots-down 4.5 percent in the trans-Pacific last year, versus a 21-percent rise between the Far East and Europe-coupled with slower vessel speeds and the growing use of space-hungry high-cube boxes, will keep the supply-demand balance from tipping in shippers' favor. In fact, member lines of the Transpacific Stabilization Agreement recently reported "early successes" in their efforts to boost rates for the coming contract season. The group predicts a net decline in trans-Pacific vessel space for the coming year, along with growth in freight traffic of between 2 and 5 percent.

Visit www.piers.com, www.globalinsight.com, www.crsl.com and www.tsa.com