4 disturbing global trade trends fueling consumer weakness, recession

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WarehouseQuote's Jordan Brunk on recent warehouse data and 2023 supply chain prospects

Wall Street’s biggest bank CEOs, from JPMorgan’s Jamie Dimon to Bank of America’s Brian Moynihan, talked about the recession as a “major issue” as part of Friday morning’s earnings reports.

It may be a “mild” one, as Moynihan predicts, but from the world of global trade, there are several signs that support bank chiefs’ view of the macro- economic, showing warning signs of continued consumer weakness for the first quarter.

The flow of trade is a real-time and advanced indicator of consumer spending and the economy as it shows supply, demand and consumption. Here are four signs to watch for and what they are showing right now.

Indicator Number 1: Inventory and warehouse rates

Warehouse inventory is a good indicator of consumer health because it measures how much product is sitting in storage. The more product that sits in storage, the more it takes up valuable space and increases the cost of storage. According to the WarehouseQuote Price Index report for Q1 2023, warehouse rates remain at high levels due to warehouse inventories not dropping significantly in November and December.

This is important because holiday products were brought in early in 2022 to avoid any delays as shippers saw in 2021. Holiday products were shipped from China to the US between March and May 2022, leading to more warehouse storage, resulting in some big inventory this summer from major retailers including Walmart and Target. During the holiday season, it took many signals from retailers to move products. Where products were being moved more successfully was through internet based sales.

“Based on the inventory, we see more customers shopping online than in-store,” said Jordan Brunk, WarehouseQuote’s chief marketing officer. “Across the industry as a whole, this means that there is more e-commerce inventory coming from warehouses than inventory going to the brick-and-mortar stores.”

Overall, he expects a lack of warehouse capacity, coupled with a lack of new square footage coming online due to the rising cost of capital and a slower economy, to keep prices up even in an environment weaker users.

In MaerskIn the TransPacific Report at the end of December, it said that weak demand “is expected to continue into 2023 due to a combination of high investment levels and the appearance of a global recession that may have started as -yes. “

Indicator Number 2: Manufacturing orders

The first indicator is manufacturing orders. Orders are still down, based on the CNBC report, given the high inventories and lack of consumer demand.

“We are still seeing a 40% drop in current manufacturing orders,” said Alan Baer, ​​CEO of OL USA. “The first season is going to be challenging. “

The reduction in orders is based on what factories usually receive from companies.

Indicator Number 3: Registration of ocean freight

As a result of the reduction in factory orders, there is less demand to store goods on a vessel. The SONAR Freightwaves chart below shows the steady decline in global ocean orders.

The health of the US consumer and the state of investments for US companies can be monitored by the amount of global products imported by sea carriers. Ninety percent of all US trade is moved by sea. The following chart from SONAR FreightWaves shows the reduced numbers worldwide.

Signal Number 4: Empty Addresses (Cancelled).

Empty sailings are a tool used by ocean carriers as a way to limit available vessel capacity which affects ocean freight rates. Due to the drop in manufacturing orders and ocean orders, there is an excess of ships. Due to the lack of demand for the movement of sea freight, due to the reduced manufacturing orders, sea levels have fallen rapidly in all trade routes.

According to Xeneta and Sea-Intelligence, ocean carriers canceled more than six times as many sailings on the Asia to the US West Coast trade route ahead of Chinese New Year as they did during the same period in 2019.

“In a normal year, we tend to see very few empty addresses before this major Chinese holiday as shippers maintain their investments,” said Peter Sand, principal analyst at Xeneta. “So, this is a worrying development for carriers and, of course, a bad omen for what’s to come for the year ahead.”

Deferred addresses on other major trade routes have also been increased. The Far East to the US East Coast increased by 340% over the same period. Asia to Northern Europe has seen a 715% increase in empty addresses.

“This really shows the low level of demand that is gripping the industry,” said Sand.

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