Transcript State of the Economy: Part 3 - Pacific Northwest Waterways

A 3rd Update on West
Coast International
Trade Economics
Pacific Northwest Waterways Association
Annual Meeting
June 28, 2011
Coeur De Alene
Thomas J. McCollough, P.E.
Moffatt & Nichol
Special Thanks
Dr. Walter Kemmsies, Chief Economist
Moffatt & Nichol Background
• ENR Top 100 company, founded in 1945 in Long Beach, California
•
Offices: US, Guam, Canada, Europe, Middle East, Latin America and the Pacific Rim
•
More than 500 Employees
•
Practices: Goods Movement, Energy, Ports, Coastal, Urban Waterfronts & Marinas,
Inspection & Rehabilitation
• M&N combines the expertise of technical and commercial specialists gained
over 65 years of planning and engineering experience on over 6,000 projects:
•
•
•
•
•
•
•
•
•
Economic analyses of investment/privatization
Strategic development plans
Independent Market Consultant
Coastal engineering
Port and waterside construction (marinas)
Terminal design for all types of freight and passenger movement
Surface transportation connectivity
Railroads and capacity expansion
Environmental issues/emission modeling
American Society of Civil Engineers
John G. Moffatt – Frank E. Nichol
Harbor and Coastal Engineering Award
Observations
• It is risky to go forward by staring in the rearview mirror
• Look where we are going and not where we
have been
• The key question is, “What sector will lead this
recovery cycle?”
– Not what drove the last one
Take-Aways
Recovery is proceeding “as planned”, a bit early for an “all clear”
Sustained World economic recovery depends on the US
Real estate-exposed sectors will take a few more years to recover
Inflation and government debt are a risk but not immediately
Long term concerns could be lessened by more balanced trade
US needs to increase exports and reduce oil dependency
China needs to withdraw from market interventions
Positive outlook for agricultural exports but avoid euphoria
Energy costs are an issue
Need more action and less discussion
GDP Growth In Developed and Emerging Markets
Developed Economies Are Struggling…
… China and India Are Leading
12%
12%
10%
10%
8%
8%
6%
6%
4%
4%
-4%
-4%
-6%
-6%
-8%
-8%
-10%
-10%
-12%
-12%
•
China and India are carrying the load by investing in infrastructure
Dec-11
Sep-11
Jun-11
Mar-11
Dec-10
Sep-10
Jun-10
Mar-10
Dec-09
Sep-09
Jun-09
-2%
Mar-09
Japan
United States
Dec-08
United Kingdom
India
0%
Sep-08
Dec-11
Jun-11
Sep-11
Mar-11
Dec-10
Sep-10
Jun-10
Mar-10
Dec-09
Sep-09
Jun-09
Dec-08
Mar-09
Sep-08
Jun-08
-2%
Euro Area
Mar-08
0%
China
2%
Jun-08
Canada
Mar-08
United States
2%
Mexico
Brazil
World Economy StrainsTo Recover Without The US
US Consumer Spending and Global Real GDP Growth
10%
8%
6%
4%
2%
-2%
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
0%
-4%
-6%
-8%
World GDP
•
•
•
US Consumer
The US accounts for 25% of World GDP
US consumers account for 70% of US GDP, or 17.5% of World GDP
US population accounts for 4% of the world
World’s Major Economies
Country
US
China
Japan
Germany
France
UK
Brazil
Italy
Canada
India
Russia
Population
Share
Millions
4.5%
310
19.7%
1,341
1.9%
127
1.2%
82
0.9%
63
0.9%
62
2.8%
193
0.9%
60
0.5%
34
17.8%
1,216
2.1%
140
Rank
3
1
10
15
21
22
5
24
36
3
9
Current $
$
$
$
$
$
$
$
$
$
$
$
47,284
4,382
42,820
40,631
41,019
36,120
10,816
34,059
46,215
1,265
10,437
GDP per Capita
PPP
Rank
9
93
16
19
18
22
53
23
11
134
56
47,284
7,519
33,805
36,033
34,077
34,920
11,239
29,392
39,057
3,339
15,837
Rank
7
94
25
20
24
22
71
29
13
126
52
World’s Major Economies
Country
US
China
Japan
Germany
France
UK
Brazil
Italy
Canada
India
Russia
Population
Share
Millions
4.5%
310
19.7%
1,341
1.9%
127
1.2%
82
0.9%
63
0.9%
62
2.8%
193
0.9%
60
0.5%
34
17.8%
1,216
2.1%
140
Rank
3
1
10
15
21
22
5
24
36
3
9
Current $
$
$
$
$
$
$
$
$
$
$
$
47,284
4,382
42,820
40,631
41,019
36,120
10,816
34,059
46,215
1,265
10,437
GDP per Capita
PPP
Rank
9
93
16
19
18
22
53
23
11
134
56
47,284
7,519
33,805
36,033
34,077
34,920
11,239
29,392
39,057
3,339
15,837
Rank
7
94
25
20
24
22
71
29
13
126
52
Growth Driven By Investment
Composition of China’s GDP: 1995 - 2010
60
50
China
India
40
Mexico
Saudi Arabia
World
30
Japan
Brazil
United States
20
Germany
10
2016
2014
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
0
High Unemployment, Low Consumer Sentiment
Consumer Sentiment and Unemployment Indexes
300
250
200
150
100
50
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
0
Recession
Consumer Confidence Index
Unemployed
Private Sector Has Led Employment Recovery
Changes In Employment Levels in 2010 By Sector
2,000
Accumulated Payrolls in thousands
1,800
Private
1,600
1,400
Non-farm
1,200
1,000
800
Federal
600
400
200
State
0
-200
Local
-400
•
Jun-11
May-11
Apr-11
Mar-11
Feb-11
Jan-11
Dec-10
Nov-10
Oct-10
Sep-10
Aug-10
Jul-10
Jun-10
May-10
Apr-10
Mar-10
Feb-10
Jan-10
-600
Private sector efforts were offset by public sector cutting 400K jobs
Home Prices Still “Correcting”
US Home Prices and Consumer Price Index
400
350
300
250
200
150
100
50
FHFA Home Price Index
•
CPI
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1990
0
Home Sales
Home sales levels have stabilized by falling prices and low financing costs
Delinquencies Have Peaked – Inventory Remains High
Mortgage Foreclosures and Delinquencies
Retail Sales Recovering – Production, Inventories Lag
Retail Sales, Inventory and Inventory-to-Sales Ratio
550
120
500
100
Billions of Dollars
450
400
80
350
60
300
250
40
200
20
150
Retail Sales
•
•
Inventories
Apr-11
May-10
Jun-09
Jul-08
Aug-07
Sep-06
Oct-05
Nov-04
Dec-03
Jan-03
Feb-02
Mar-01
Apr-00
May-99
Jun-98
Jul-97
Aug-96
Sep-95
Oct-94
Nov-93
Dec-92
0
Jan-92
100
Industrial Production (right axix)
Retail sales above December 2007, driven by replacement purchases
Slow inventory rebuild due to poor home sales and cautious managers
US International Container Trade Trends
Monthly TEU Volumes – 12 Largest US Ports
3,500,000
+14.2%
3,000,000
+10.7%
2,500,000
2,000,000
+15.2%
1,500,000
+5.2%
1,000,000
500,000
+27.1%
Index
•
•
•
Total
Total Loaded
Exports
Dec-11
Sep-11
Jun-11
Mar-11
Dec-10
Sep-10
Jun-10
Mar-10
Dec-09
Sep-09
Jun-09
Mar-09
Dec-08
Sep-08
Jun-08
Mar-08
Dec-07
Sep-07
Jun-07
Mar-07
Dec-06
Sep-06
Jun-06
Mar-06
Dec-05
0
Empties
Imported and empty containers led growth in 2010
Exports were surprisingly flat, some likely shifted to bulk
Decline in imports since 2011 peak is out of line with retail sales trends
US Non-fuel Export Trends
Non-fuel Exports By Weight By Type Of Vessel
350
331
Millions of Metric Tons
317
295
300
294
263
250
247
247
235
235
220
200
211
191
187
178
207
182
150
100
97
96
87
84
50
56
60
2003
2004
65
72
0
2005
Total
•
•
2006
Containerized
2007
2008
2009
2010
Not-Containerized
Bulk began shifting into containers in 2007, shifted back some in 2010
Exports grew 12.7% in 2010; containerized 13.4%, other 11.1%
Where We Are Going
• Where is the bottom – approaching it now Q2 09 was bottom
• Recovery may be “W” shaped, i.e. not sustained
– When & how inflation will occur
– Response of policy makers …labor benefits not extended
• Economic drivers have not changed
–
–
–
–
Aging population (% of total leaving the work force)
Population growth slowed & will slow further
Buying more services than durable goods
Outsourcing will continue & will increase (import substitution)
• Efficiency /Reliability vs. Capacity (slow steaming problem for
importers, increasing supply chain..decreasing control for
merchants)
Economic Outlook for Major Trade Lane Economies
Real GDP Growth (year on year) By Major Trade Lanes
12%
10%
8%
6%
4%
2%
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
-2%
1998
0%
-4%
US recession risk in 2011
-6%
-8%
-10%




US
Europe
Nort Asia
South Asia
South East Asia
Emerging Markets have higher population and productivity growth
Near term is weak due to mature economies
Policy withdrawal creates uncertainty - look for “all clear” in 2011-H2
World trade patterns will change due to the changing relative size of emerging and mature
economies over the forecast horizon
Source: International Monetary Fund, US Department of Commerce, Moffatt & Nichol
Oil Consumption Trends 1965 - 2009
Crude Oil Consumption
100
$120
90
$100
Millions of Barrels Per Day
80
70
$80
60
50
$60
40
$40
30
20
$20
10
Developed Economies
•
•
Emerging Markets
World
2010
2007
2004
2001
1998
1995
1992
1989
1986
1983
1980
1977
1974
1971
1968
$0
1965
0
WTI Annual Average (right axis)
8 million barrels of crude oil were consumed daily in 2010
Since 2008 Emerging Markets consume more oil than Developed Economies
Source: UN-ILO, Business Monitor, Moffatt & Nichol
The World’s Population Is Aging
Proportion of Population Above 55 Years of Age
60%
Japan
50%
Europe
China
40%
Canada
US
30%
Brazil
Mexico
20%
India
10%
0%
1990
2000
2010
2020
2030
2040
2050
Unsustainable Trade Deficit
US Trade Balance Components: 1992 -2010
$20
Billions
-$20
-$40
2011
2010
2009
2008
2007
2007
2006
2005
2004
2003
2002
2002
2001
2000
1999
1998
1997
1997
1996
1995
1994
1993
1992
1992
$0
45% of the
trade
deficit is
due to
petroleum
imports
-$60
-$80
Goods Balance
•
•
Services Balance
Including oil, the goods deficit is 4.8x the services surplus, 2.8x excluding oil
Increased import dependency is unavoidable – the US needs to export more
Source: US Census Bureau
US Export Candidates
•
Bulk commodities and specialized capital goods (project cargo) fit the profile of
US comparative advantages
•
Relative to faster growing Emerging Markets, the US has
•
•
•
•
•
A lower cost of capital, but a higher cost of labor
Relative abundance of scare resources such as water
More advanced biotechnology
More reliable quality control and surveillance of compliance
Strong Emerging Market demand for bulk is expected to continue as these
economies continue to grow and develop
•
•
•
•
Grains and oilseeds
Meat
Biofuels – wood pellets
Coal and other raw materials
•
Strong bulk demand also means strong demand for capital equipment – energy,
construction, agricultural
•
US has to develop infrastructure to compete in the global market place – its rivals
have and continue to do so
America Is The World’s Bread Basket
•
Lack of investment in inland waterway infrastructure is a significant bottleneck
Shares and Containerization of US Grain Exports
Shares of US Grain Exports
Port
Columbia-snake
Los Angeles, CA
Minneapolis, MN
New Orleans, LA
Norfolk, VA
San Francisco, CA
Seattle, WA
2003
16%
0%
0%
59%
0%
1%
5%
2004
19%
0%
0%
53%
0%
1%
9%
2005
18%
1%
1%
50%
1%
1%
10%
2006
16%
1%
2%
53%
1%
1%
9%
2007
17%
2%
3%
50%
2%
1%
8%
2008
19%
2%
1%
45%
2%
1%
10%
2009
19%
2%
1%
51%
2%
2%
9%
2010 Gain
18%
1%
1%
1%
2%
2%
48%
-7%
1%
1%
1%
1%
10%
2%
Containerization of Grain Exports By Port
Port
Total All Ports
Columbia-snake
Los Angeles, CA
Minneapolis, MN
New Orleans, LA
Norfolk, VA
San Francisco, CA
Seattle, WA
2003
1%
3%
32%
2004
2%
2%
88%
1%
8%
26%
1%
0%
14%
32%
3%
2005
2%
1%
76%
0%
0%
3%
42%
7%
2006
3%
5%
81%
0%
0%
3%
46%
12%
2007
4%
5%
80%
0%
0%
5%
60%
14%
2008
5%
3%
77%
5%
0%
10%
68%
8%
2009
5%
3%
91%
0%
0%
14%
61%
4%
2010
3%
1%
93%
0%
0%
8%
53%
4%
Rail Replaces Inland Waterways
•
Rail can handle agriculture exports in place of the inland waterway system
Containers Concentrate In Population Centers
•
•
These are the locations where the bulk of consumption takes place
Containers increasingly retained near ports – hard to containerize exports
Currency Trends Are Generally Favorable
US Dollar Exchange Rate Indexes
160
140
Emerging Markets
120
100
Broad
80
Developed Markets
60
40
20
1972
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
0
China’s Currency Policy Is A Global Economic Risk
Exchange Rates Between US$, Chinese Yuan and Brazilian Real
9
8
7
Yuan Per Dollar
6
5
Yuan Per Real
4
3
2
Real Per Dollar
1
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
0
Summing Up...
Recovery is proceeding “as planned”, a bit early for an “all clear”
Sustained World economic recovery depends on the US
Real estate-exposed sectors will take a few more years to recover
Inflation and government debt are a risk but not immediately
Long term concerns could be lessened by more balanced trade
US needs to increase exports and reduce oil dependency
China needs to withdraw from market interventions
Positive outlook for agricultural exports but avoid euphoria
Energy costs are an issue
Need more action and less discussion
Questions & Comments
Contact Information:
Walter Kemmsies
[email protected]
Tom McCollough
[email protected]
www.moffattnichol.com