Tuesday, February 2, 2010

Signs Of Recovery Bode Well For Global Freight And Logistics Shippers

Industry Indicators Show Improvements in Different Sectors
Shipping News Feature

WORLD WIDE – It would take a brave man or a fool to predict that the crisis which has crippled shipping in the past two years was over. A look around the globe at various shipping indices however confirms that in several different sectors there are genuine signs of improvement and, more importantly, they often signify a longer term improvement.

In the US the latest Institute for Supply Management figures for January showed a leap to 58.4% from the previous months 54.9. A figure over 50% indicates growth in these surveys and this particular Purchasing Managers Index has achieved that for the past few months. Yesterday the Chinese equivalent statistics showed a fall, but only of 0.8% to 55.8%. This means that assuming the Index manages 50% or over next month it will have shown growth in the sector for an entire year. In November 2008 an identical survey showed a Chinese figure of 38.8%.

A separate Index, the HSBC China Manufacturing Purchasing Managers Index last month showed 10 consecutive months of growth and hit 57.4%, again rising from disastrous levels a year ago. Exports and new orders rose faster in the month than at any time in the past five years. HSBC of course indicated where it thought its future lies just a couple of weeks ago when it relocated the office of its CEO to Hong Kong and commenced plans for a listing on the Shanghai Exchange, a neat historic reversal of fortune (HSBC were originally the Hong Kong and Shanghai Banking Corporation).

Investors are said to be sharing the confidence in the green shoots of recovery. Back in the US, where the transport and logistics sector reaches fourth spot in the table of economic importance, analysts are predicting a recovery for the sector based on historic models. The word is that transport is the place to be in the wake of a recession. Acquisitions like that of Warren Buffett’s purchase by his Berkshire Hathaway Corporation of rail freight giant Burlington Northern Santa Fe outfit give their predictions some credence.

Forecasts for Europe are a mixed bag with the usual indicators, the futures market awaiting reports due this month from several European economies. Overall the picture seems to be a lack of confidence still in the major markets as Eurozone countries continue to wait and see, the very nature of the various countries making up the community makes this a hard one to predict as an overall package. Greek debt is a major factor at the moment with a statement tomorrow expected from the European Commission in support of the Greek governments proposals to make swingeing cuts to reduce the national budget deficit. The debt level is currently 13% per annum and the Greeks have announced they will reduce it to 3% in three years, to most observers a seemingly impossible target which may strain the ingenuity of the Commissions economic experts to new levels as they fight to preserve the currency whilst being seen not to bail out one member country as they are politically bound not to do.

Compared to the other European countries Britain’s FTSE futures forecast is good, probably because of the depths of recession to which the country has sunk coupled with an imminent election. The problem now for the UK is that sterling is likely to rise rapidly against the Euro whilst the Greek crisis persists leaving the country’s exporters facing stiffer competition from their European rivals as they join the US as a valued buyer of cheaper European goods.

Over all these predictions however hang the twin blades of Damocles in the form of Chinese fiscal policy and global protectionism. Whilst Greece is unable to devalue her currency due to her presence in the Eurozone the Chinese can smile beatifically at their customers and choose exactly how much their goods cost in real terms overseas. Whilst the US presses for a revaluation to restore the balance of trade they still harbour the desire to restrict their imports through rising tariffs, knowing all the while that this will promote a tit for tat reaction. 2010 should prove an interesting year.