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Home » Free-Spending Consumers Bolster U.S. Economy; Prospects for World Economy Seem Bright

Free-Spending Consumers Bolster U.S. Economy; Prospects for World Economy Seem Bright

May 1, 2007
Global Logistics & Supply Chain Strategies

Michael D. Andrews, chief economist with PIERS Maritime Research, told the Long Beach TPM audience that the U.S. economy will pick up steam in the second quarter of this year and beyond. It had lost momentum, growing below its supposed potential for three straight quarters, but will soon get back on track, he said. At the same time, the global economy "is projected to remain very solid, with growth likely to moderate only slightly this year and in 2008." But don't waste time waiting for oil prices to drop sharply. They'll remain "elevated," Andrews said. The champion performer of late, at least in relative terms, has been consumer spending, which has remained steady despite the housing slump. Manufacturing, thanks to an inventory correction caused by excessive production, hasn't been so fortunate. Looking ahead, Andrews sees U.S. economic growth maintaining at around 3 percent, with consumer spending expected to remain firm. Business spending will rebound from the beating it took in the fourth quarter of last year, with corporate profits and balance sheets looking healthy. As for that inventory drawdown that put the brakes on manufacturing, it should end "over the next few months."

China will continue to dominate the trans-Pacific trade, said Andrews, boosting its share of total U.S. imports and exports from Northeast Asia. But some see that trend as cause for worry. "The continuing reliance on Chinese exports must be called into question over the next few years," said Andrew Penfold, director of Ocean Shipping Consultants PLC. China's dominance raises issues of volatility in the ocean shipping trade, he said. Also in question is the continued supremacy of U.S. West Coast container ports, particularly those in Southern California. Penfold sees them as losing market share to growing all-water services through the Panama Canal. Mounting capacity and environmental limitations, coupled with the development of port facilities in Mexico, will further serve to erode their business. "I think the wind is beginning to change for some California ports," he said. Barry Horowitz, general manager of container marketing at the Port of Portland, echoed that view. By 2020, he said, the U.S. share of West Coast North American TEU capacity will decline from 86 percent to 72 percent of the total.

Visit www.piers.com and www.osclimited.com.

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