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Jan.12, 2015

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Page 48 of 163 THE JOURNAL OF COMMERCE 47 2015 ANNUAL REVIEW & OUTLOOK MARITIME IN PERSPECTIVE Outlook Mixed for US Box Trade A lthough U.S. income growth in the first three quarters of 2014 was only marginally better than the same period a year earlier, it was suf- ficient to provide the U.S. unemployed with much-needed relief. The U.S. unemployment rate has been on a steadily downward trajectory over the past year, hitting just 5.9 percent in October. With hiring picking up momentum, consumer confidence in the U.S. has been moderately positive with the expectations component showing clear signs of improvement. Combined with improved U.S. aggregate income growth, personal consumption expenditures in the U.S. should be rising, but this hasn't been the case in the aggre- gate. One reason is that, despite positive jobs growth for the year, the jobs have been concentrated in low-wage occupations. Moreover, wage growth for low- and middle- income occupations have been stagnant. A more robust economic recovery would show real per- sonal consumption expenditures rising more rapidly than GDP as pent-up demand is released. This is borne out in some commodity categories, but these haven't translated into improved containerized trade growth. While clothing and footwear spending was virtually flat — a development mirrored by U.S. containerized apparel imports — spending on home furnishings increased 1.2 percent per quarter on average. This contrasts starkly with the weakness found in this trade, suggesting U.S. consumers are spending less on this commodity abroad and more from domestic or near- sourcing areas such as Canada and Mexico. The same logic may apply to real expenditures on games, toys and hobbies. Spending in this group increased an average of 2.5 percent per quarter, but inbound contain- erized trade for toys was abysmal over the same period. Meanwhile, U.S. GDP expanded at a 3.5 percent sea- sonally adjusted annual rate in the third quarter of 2014, and import prices excluding fuel declined 0.3 percent thanks to the stronger U.S. dollar and weakness in pric- ing power for Asian and European producers. U.S. GDP will expand at a 2.2 to 3.0 percent pace over the next nine quarters, with labor market conditions tightening. I believe stagnant wage growth has begun to sub- side, with third-quarter 2014 data showing a 2.2 percent increase in average wages, the best performance since early 2011. Further evidence of this is the rising quit rates — U.S. workers are voluntarily leaving their jobs at rates approaching 2006 levels, likely because of improved wage offers at other companies. Such an improvement in worker salaries will support an increase in personal consumption expenditures. We also witnessed a near collapse of oil prices toward the end of the third quarter, which should have a positive impact on consumption for the near term. Falling global oil prices also should keep the U.S. trade deficit from falling too far and therefore provide additional strength to the dollar. Therefore, I am projecting growth of 6.8 percent in U.S. containerized imports this year, to 20.3 million 20-foot-equiv- alent units, following an expansion of 6.0 percent in 2014. The downside risks to the forecast remain geopolitical, but the severe congestion at West Coast ports, and a potential overreaction in U.S. equity markets to the inevitable rise in interest rates also bear watching. U.S. exporters, meanwhile, have contended with weakening external markets and declining favorability of real exchange rates for much of the past year. Global economic growth has slowed as officials in China, Europe and Japan failed to adequately address their fiscal issues. The Russian economy, burdened by plunging oil prices and sanctions over its military action in Ukraine, barely budged in 2014. In Brazil, where high interest rates and high infla- tion have plagued economic performance, third-quarter growth will amount to just 0.25 percent. Still, that's better than the recession the country suffered in the first half of the year. B Y M A R I O O. M O R E N O

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