A recent WSJ article reports on low container shipping prices, just ahead of the peak summer and early fall shipping season. This is raising concerns that demand for consumer goods is declining—and at a minimum—indicates that retailers are forecasting declines in demand this holiday season.
According to the WSJ:
Average daily freight rates from Asia to the U.S. West Coast across the Pacific are at roughly $1,500 per 40-foot container, compared with more than $14,000 a year ago, according to the Freightos Baltic Index. The cost to send a box from Asia to Europe is at roughly $1,400, compared with nearly $11,000. The rates for both trade lanes are hovering around 2019 levels, but fuel and labor expenses are higher now than before the pandemic.
Retailers plan months in advance for key shopping seasons, and if shipping prices are higher during the summer, that suggests there’s a robust demand for goods. This year, a decline in shipping demand indicates a more pessimistic view from retailers for the upcoming fourth quarter—retail’s biggest shopping quarter. It also alludes to the looming recession many are keeping a watchful eye for.
Predicting a recession is a complex task, but there are several key indicators that economists and analysts typically consider. The best indicators for predicting a recession include unemployment rate, consumer spending, manufacturing production, and inflation rates. Global shipping rates are helpful, in that they can reflect sentiment of where the economy will be over the next three to six months.
The combination of robust consumer spending, high inflation, rising consumer debt, and low global cargo shipping rates in May presents a multifaceted depiction of what we may expect over the next couple of months. Overall, these indicators provide a mixed opinion about where the economy is heading. Time will tell.