The LA Times is reporting Cargo decline is another sign of slowing economy.
Cargo containers crammed with foreign-made goods that were supposed to set a record in August at major U.S. ports took an unexpected turn, with imports sinking 1.4% in another sign of the slowing of the economy.
Imports of items as diverse as toys and tiles could also be lower in September and October, when retailers will be stocking shelves for the holidays, because shell-shocked shoppers are expected to continue to pull back.
[Mish Comment – See Consumer Credit vs. Weakening Demand for more on “Toy Wars”]
The slump in oceangoing imports unloaded at the 10 largest U.S. container ports in August was the first drop since Global Insight began its monthly Port Tracker report in 2005. The number stunned some port watchers. “When I first saw these numbers, I called the researchers and asked them if they had left a column out of the spreadsheet. I thought it was a typo,” said Craig Shearman, vice president of the National Retail Federation, which pays Global Insight to conduct the trade research.
“The dollar has depreciated so much that American goods are more competitive,” said Sung Won Sohn, chief executive of Hanmi Bank in Los Angeles. On the other hand, the import decline “tells you about what retailers are thinking about the holiday shopping season. They’ve cut back orders.”
Given the pressure on consumers’ budgets, economist Scott Hoyt expects modest spending growth through the year. “As long as we continue to have at least decent job gains with tight labor markets, then we’ll have enough growth and wage income to support positive spending growth,” said Hoyt, with Moody’s Economy.com.
- Building material imports – down 20%
- Furniture imports – down 17%
- Clothing imports – down 10%
- Footwear – down 8%
What’s Gathering Dust in Warehouses?
- Light fixtures
- Anything related to home sales
“As long as we continue to have at least decent job gains with tight labor markets, then we’ll have enough growth and wage income to support positive spending growth” says economist Scott Hoyt at Moody’s.
I question that opinion. A few numbers might show why.
Job Gains and Losses
- Last month we added 73,000 private sector jobs, but manufacturing employment decreased by 18,000. Over the year, manufacturing lost 223,000 jobs.
- In construction, residential specialty trade contractors shed 15,000 jobs over the month and 160,000 since February 2006.
- Employment in food services and drinking places increased by 25,000 in September. This industry has added 355,000 jobs over the year.
The US economy just cannot keep humming along while shedding manufacturing jobs month after month while gaining jobs at Wal-Mart (WMT) and Pizza Hut (YUM) to replace them. We can’t all get rich serving pizzas to each other can we? For more discussion on jobs please see September Jobs – Crisis Averted?
What About the Weather?
Inquiring minds just might be asking about the weather. Professor Depew was all over that idea in point number 1 of Tuesday’s Five Things. Let’s have a look at Heat Cools Retail Sales.
U.S. retail sales in September rose at the slowest pace in five months as consumers cut back spending because of unseasonably warm weather, the International Council of Shopping Centers and UBS Securities (UBS) said in a preliminary statement, according to Bloomberg.
- Sales at stores open at least 12 months gained 2% from a year earlier.
- That’s the smallest since same-store sales increase since sales fell 1.9% in April.
- The results were on the low end of the ICSC’s forecast of 2% to 2.5%.
- Last month was the eighth-warmest September since 1895, according to Planalytics Inc., Bloomberg said.
- Wal-Mart (WMT) earlier this month lowered prices on some toys more than two weeks earlier than 2006.
- And Target (TGT) on Sep. 24 cut its monthly sales forecast in half.
Here’s another one for Kevin’s list: The Children’s Place Retail Stores Warns On Sales.
In light of September sales and margin results and its revised outlook for the month of October, it now anticipates that earnings per share for the third quarter of fiscal 2007 will come in at least 60% below the low end of its previous guidance of $0.94 to $1.02 given on August 23, 2007.
“Clearly we are disappointed with current business trends and our outlook for the second half of the year,” said Chuck Crovitz, Interim Chief Executive Officer of The Children’s Place Retail Stores, Inc. “Our results primarily reflect inventory levels at both brands that are higher than we would like given current sales trends, particularly at The Children’s Place brand. As a result, we had to take a substantial amount of unplanned markdowns during September, resulting in merchandise margins well below our plans. At this time, we believe these trends are likely to continue through the remainder of the year.”
The Company further commented that it believes certain external factors, such as the unseasonably warm weather particularly in the last 10 days of the month, put substantial pressure on the business.
It’s quite amazing that 10 days of warm weather could cause a 60% decline in sales estimates for the Children’s Place (PLCE) for the entire quarter. But what’s even more amazing given shipping lead times, was the “just in time” falloff in cargo shipments at the Port of LA right ahead of 10 days of unseasonably warm weather. Somehow those importers must have known this horrendous weather was coming in advance.
Mike Shedlock / Mish/