Economic Outlook and Ports Paul Bingham Managing Director, Global Trade and Transportation February 18, 2009
The Outlook for Trade Depends on Goods Demand Integrated international supply-chains offer efficiencies but increase interdependencies between economies Globalization increased business-cycle synchronization The increased importance of trade as a share of economies increases vulnerability of economies to outside forces Import and export trade is affected by the current global recession. Weak U.S. import demand has slowed foreign economies which, in turn, are reducing demand for U.S. exports 2
World Trade Share of Economic Activity: Declines in 2009 with Prices and Goods Demand 45 (World imports, percent of GDP) 40 35 30 25 20 15 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 Long-term trend towards increased trade will reassert itself in recovery in 2010 3
The Worst Global Recession in Six Decades North America, Europe, and Japan are facing severe downturns Growth in emerging markets will slow dramatically The financial crisis ended the U.S. export boom A Great Depression or Japan-style lost decade is unlikely Huge fiscal and monetary stimuli will help to spark recovery Base line forecast: deep recession in 2009, modest recovery in 2010, and a stronger rebound in 2011 4
The World Economy Faces the Worst Recession of the Post-World War II Era, then Recovers 8 (Percent change for the world economy) 6 4 2 0-2 -4 1980 1984 1988 1992 1996 2000 2004 2008 2012 Real GDP Industrial Production 5
Economic Performance Varies Widely by Region 10 (Real GDP, percent change) 8 6 4 2 0-2 -4 NAFTA Western Europe Japan Other Americas Emerging Europe Mideast- N. Africa Sub- Saharan Africa Other Asia- Pacific 2007 2008 2009 2010 6
The U.S. Economy Still in Deep Recession This recession in the U.S. will be long and deep, comparable to the worst in the postwar era The global financial crisis has ended the U.S. export boom Consumers, businesses, and state & local governments are restraining spending as their finances deteriorate Federal fiscal stimulus and lower energy prices will help to spark recovery beginning in late 2009 Stimulus bill spending is spread broadly across many sectors leaving U.S. transportation infrastructure needs unmet 7
U.S. Recovery in 2010; Unemployment Up Longer 8 (Annual percent change, 2000 dollars) (Percent) 10 6 9 4 8 2 7 0 6-2 5-4 4-6 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 3 Real GDP Growth Unemployment Rate 8
U.S. Economic Growth by Sector (Percent change in value) 2007 2008 2009 2010 Real GDP 2.0 1.2-2.7 2.7 Consumption 2.8 0.3-1.0 2.5 Residential Investment -17.9-21.0-23.1 15.8 Bus. Fixed Investment 4.9 1.9-15.2-1.3 Federal Government 2.1 2.9 1.4 0.9 State & Local Govt. 2.3 1.2 0.4 2.9 Exports 8.4 6.5-9.4-1.1 Imports 2.2-3.3-11.8 7.0 9
U.S. Dollar Recovery is Brief 1.3 (Real Trade-Weighted Dollar Index, 2000=1.0) 1.2 1.1 1.0 0.9 0.8 0.7 0.6 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 Major Trading Partners Other Important Trading Partners 10
Canada and Mexico are also in Recession Real GDP is expected to decline through mid-2009 in both Exports and investment are declining, while consumer spending has stalled The global financial crisis and falling commodity prices and equities prices have affected business in both countries Sectors that will be hit hard in 2009 include petroleum, construction, mining and transportation equipment 11
Total World Seaborne Trade Tonnage Falls in 2009 14 12 10 Percent Cha ange 8 6 4 2 0-2 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 12
Total World Container Trade Volume Drops in 2009 18 16 14 12 Percent Chang ge 10 8 6 4 2 0-2 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 13
U.S. East-West Container Export Boom over in 2009 25 20 15 Percent Change 10 5 0-5 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-10 Far East Europe + Med 14
U.S. East-West Container Imports Still Down in 2009 20 15 Percent Ch hange 10 5 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-5 -10 Far East Europe + Med 15
China Export Growth has Slowed Most with U.S. (Merchandise exports 6-month moving average, percent change from year earlier) 50 40 30 20 10 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 Total Asia Europe U.S. 16
Implications for Ports Short-run has port customers mostly in survival mode, with the strong positioning for higher market shares when recovery takes hold. Long-term, rebounding and increasing U.S. trade volume eventually adds new traffic through smaller port gateways and on secondary traffic lanes. Big ports run up against capacity limitations, eventually. Trade growth through ports affected by inland transport rail & truck mode portions of shipments. These are under pressures from energy, environmental and labor dimensions over the long-term. Port cash flow and access to financial markets are now critical. 17
Thank you! Paul Bingham Managing Director, Global Trade and Transportation paul.bingham@ihsglobalinsight.com 202.481.9216