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July 3, 2023

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52 Journal of Commerce | J uly 3, 2023 www.joc.com Land Lines Lawrence Gross Returning to trend ever larger, so growth in percentage terms is declining. The value of creating the trend line is that we can then extend it through the pandemic shutdown and subse- quent recovery to see what things might have looked like if the pandemic had not occurred. We have shown that as the purple line on the fi rst chart. The fi nal step is to track the cumu- lative amount of TEUs received to date and compare it with the cumulative volume of imports that would have arrived as of that date according to the trend line. This is presented in the that it works quite well in this case. The 12-month moving average rarely deviates very far from this linear trend. One interesting aspect of this approach is that it shows that growth has been slowing. The compound annual growth rate (CAGR) over this time frame works out to be a little more than 4.5%. But based on the linear regression, this 4.5% overall growth actually started at about 6.6% in 2009, declining over time to about 3.5% in 2019. Put another way, the increase per month is relatively con- stant but the volume base is growing JUDGING BY THE headlines of late, there are some in the freight-moving business that are shocked (shocked!) by the recent year-over-year declines in volume. But given the strength of the pandemic surge, sizeable year-over-year defi cits were an inevitability. The current defi cits are not necessarily indicative of a "melt- down" but rather simply the market self-correcting after a period of excess demand. Unless you were convinced that the pandemic had permanently changed consumer buying habits, it was clear that the surge would prove to be unsustain- able. The questions were when the fever would break and how bad the payback might be. But if we're going back to trend, where do we stand right now in that process? The following analysis indicates that we are well down the path toward normalcy. If current conditions continue for another few months, the surge-related volume overhang will be worked o . The fi rst chart shows the monthly volume of import TEUs arriving in the US and Western Can- ada from the beginning of 2009, the fi rst normal year following the Great Recession, through April 2023 (blue line). The orange line is the 12-month moving average of the data, while the purple line is the best-fi t linear trend for the period from January 2009 through December 2019. In other words, what was the trend during this "normal" period before the pandemic and the subsequent recovery threw a monkey wrench into the works? We can use linear regression to fi nd one possible answer. This tech- nique generates a straight line that best fi ts the data. It turns out that the best-fi t line starts out at 1.3 mil- lion import TEUs in January 2009, and from there monthly import vol- ume increases by about 7,200 TEUs per month. Linear regression is certainly not always the best technique for deter- mining the trend. But the graph shows Import volumes remain well below trend through April Monthly containerized US imports arriving in the US and Western Canada, in TEUs TEUs 2,40,00,00 1,00,00,00 2,00,00,00 2,50,00,00 1,50,00,00 L L 2010 2015 2020 Not seasonally adjusted NSA 12 month moving average Linear estimate NSA 1.897M L 2.458M 2.511M 2 458M 2 458M Im Feb, 2023 2,77,95,05 Source: PIERS, individual ports © 2023 S&P Global Pandemic-induced volume overhang peaked in September 2022 Percentage of containerized US imports compared with trend -6% -10% 0% 10% 5% -5% L L 2010 2012 2014 2016 2018 2020 2022 % of annual over or under Source: PIERS, individual ports © 2023 S&P Global

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