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World Trade Service Container Trade Forecast Flash

Dear World Trade Service Clients:

Since publishing the last World Trade Service forecast, we have monitored the ocean container trade flows for a number of regions and reviewed the forecast as a result of the economic slowdown that is becoming increasingly apparent.  We have been concerned with the growing number of economic indicators for the European Union which point to a greater loss of consumer confidence that had been previously anticipated.  Indicators now suggest that the EU is now headed towards recession.  Industrial production in the Eurozone fell 1.9 percent in May according to recent Eurostat data; this is the sharpest drop since 1992.  In Germany the Government is warning that the economy could contract by as much as 1.5 percent, while both Italy and Greece have seen industrial production slump 6.2 percent.

As a result of this review the decision was taken to revise our forecast for the three East-West trade lanes, namely the Transpacific, the Transatlantic and the Far East Europe trades.  This forecast flash is being released in advance of our regular forecast schedule as an interim step in advance of the full world trade forecast update now underway and to be updated in September. The online World Trade Service database has been updated to reflect the new trade route projections.  The full world trade route forecasts updates will be released in September on the regular schedule.

In addition to the macro economic indicators pointing to a significant economic slowdown and a sharp drop in consumer demand and industrial output, we have also taken into account transportation industry data to help in our update to the forecasts.  The monthly monitoring of U.S ports in our Port Tracker clearly showed that that the weakness in U.S. imports was continuing.  The revisions to the forecasts for the U.S. trade lanes are minor, reflecting that our prior forecast was mostly in line with developments to date. 

We now forecast that U.S. containerized imports will decline 8.2% in 2008, which is slightly more pessimistic than our previous projection of a 7.1% decline. This revision is based mostly on a deteriorating outlook for imports through the Gulf ports. On the positive side, we have increased the 2008 U.S. export growth forecast from 17.7% to 22.6%. Major U.S. export destinations for which we revised our forecasts significantly upwards include Brazil, India, Indonesia, Malaysia, and South Korea. The year-over-year export growth was even more substantial in the first half of this year - 26.6%. We expect, however, that export expansion will slow in the second half due to the worsening production prospects in Europe and the appreciation of the U.S. dollar.    

On the European trade routes, our suspicion in the last forecast that the Far East-to-Europe trade was in imminent danger of a sharp drop was confirmed by data released to the media and industry by the Far East Freight Conference (FEFC).  Those figures supported our pessimism and despite having been the leading forecaster suggesting that this trade was in decline as early as November of 2007, we felt that a more intensive review should be undertaken.

It is clear that the European countries are not de-coupled from the U.S. economy and Europe's consumers have also reduced expenditures as a consequence of the housing financial crisis and rising inflation, especially oil and other primary and agricultural commodities.  The European Central Bank as well as the Bank of England, unlike the Federal Reserve in the U.S., decided to combat inflation as the worse of the two evils.  A slowdown in economic activity was permitted in an attempt to fight inflation.  Interest rates have remained relatively high.

In the Far East-to-Europe trade we clearly detect a dramatic year-to-date slowdown in growth when compared with 2007.  The data suggest that growth on the Far East-to-Northern Europe (Northwest European Continent, UK, Scandinavia, Baltic States, Russia and Eastern Europe) will now not reach the level projected in our prior forecast, which was already a lower projection that previously. 

We now believe that the annual growth rate will be no more than 2 percent in 2008, with some further downside risk remaining.  For the Mediterranean/Black Sea, trade growth will likely drop to less than 4 percent.  We also believe that 2009 will remain weak as the recessionary tendencies will be slow to work themselves through towards recovery.

(September 15,2008)

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