Global Trade Bellwether Signals Hope for U.S. Ag Economy
February 15, 2023 Most of the economic signals we’ve gotten as we move into 2023 show inflation easing, and it appears we may (hopefully) have avoided a recession, at least on the domestic front.
The dramatic slowdown in the U.S. economy resulting from the Federal Reserve’s aggressive interest rate hikes last year continues to impact spending and investment for consumers and businesses alike.
For clues as to when and how the economy will find more stability, we can look to international trade, which has long served as the bellwether to what we can expect to encounter in the broader economy.
Here’s what we’re seeing now — which despite looking grim — could be the proverbial “bottom” that we need to hit before we enter a modest return to economic growth.
The frothy profits and spending sprees enjoyed by shipping lines are dead in the water. Over the past two years, lines have splurged on a variety of things, from expanding their reach into air cargo and logistics, to sizeable investments into port operations, new equipment, and more. Sure, a lot of the spending made good financial sense and was beneficial for shippers who import and export raw materials, finished goods, and of course, agricultural products, but there was some excess, too.
Meanwhile, the constant whipsaw of supply and demand is on the downturn now and dwindling cargo volumes are expected to slide even further. The proliferation of shipbuilding contracts and orders for new shipping containers that piled up over the last two-plus years are being sharply curtailed.
Procurement departments at shipping lines are halting new orders and trying to pause those already in progress.
At the same time, the World Bank recently revised downward its growth forecast for the global economy to 1.7% for 2023 from the previous 3% growth estimate announced last June. This would rank as the third-weakest pace of global growth in nearly three decades, overshadowed only by the 2009 and 2020 downturns.
Trade offers even more insight about what’s around the corner when we take a holistic view and consider related activities such as economic development in and around key port gateways, manufacturing activity, industrial and commercial warehouse leasing, labor trends, consumer sentiment and buying trends (reflected in U.S. imports), and foreign direct investment, to name a few.
Collectively, these signs point to an improved second half of the year. I’ll even go out on a limb and predict that the World Bank will upwardly revise its global growth estimate for 2023 come June.
I’m not an economist. I’m just reading the trade leaves.
Let’s get growing!
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