U.S. – Europe Econom ic & Trade Ties The Near-term Outlook The 2012 International Propeller Club Convention New Orleans October 4,2012 William L. Ralph R.K. Johns & Associates Inc.
For Today’s Discussion Perspective on the Recession, the Recovery & the Debt Crisis • • W here m ight the econom y be headed in 2 0 1 3 ? I s the Transatlantic container m arket a “lost cause”? • R.K. Johns & Associates Inc. 2
How did w e get into this m ess? Euro Zone (est. 1999, accounts for 30% of global GDP) financial & monetary targets were clear on paper, but often ignored or “bent” to allow the weaker countries to grow & trade (example: Greece joined in ‘01 and immediately missed (or hid) the fact that it was 30% above limits!) 2008 Housing bubble burst in the US & in Europe … big difference in bank rescue efforts – Europe stop gap effort required each country to pick up the tab as “sovereign debt” (at that time, US debt/GDP was 70% … Europe avg. was nearly the same but mask the risks (Italy 106%, Greece 118%) “ Can spend if you collect taxes & have good credit” US economic recovery takes hold in 2 nd half, American confidence rebounds 2009 2010 US jobs show steady gains, upturn boosts value of the $, Greece & Ireland bank bailouts Portugal bailout, 2 nd Greek bailout, Europe invests less in US ( ‐ 20% yoy), US money market funds 2011 exit Europe , Republicans take control of House of Rep., US exports to Europe are squeezed by strong currency & weakening economics (Eurozone accounted for 19% of US exports in the 90s, down to 13% last year) US recovery dragging but confidence O.K. , spending on autos & 1 st signs of housing rebound 2012 better than job #s would predict, manufacturing still an engine of growth (although co. profits are mixed), politics is always the wildcard !!! Europe economy remains in recession – debt crisis likely under control, but consumers remain skeptical & manufacturing in 8 ‐ month funk, weak Euro should help exports R.K. Johns & Associates Inc. 3
European Joblessness is a Real Problem w hen trying to im pose further austerity “W e think it w ill be very hard for Europe to throw us out,” Greece’s Left w ing political leader R.K. Johns & Associates Inc. 4
Last Year, only 3 European countries w ere in Recession … this Year I t’s 9 ! 2012 Big 3 are forecast to repeat ’12 slow growth in ’13 then see avg. gains by ‘14 2011 All 4 are forecast to stay in recession thru ‘13 R.K. Johns & Associates Inc. 5
“W e are Dialing Back Expectations for Am erica” Wells Fargo Bank, Oct ‘12 • Industry growth – a bet on consumer confidence • Employment is a lagging indicator, BUT temp hiring & longer work hours signaling some strength • SLOW sell off in housing inventory (need a fairly big cut in “month’s supply”) • Home price index (S&P/Case Shiller) starting to rise (still high negative equity holdover) US real GDP forecast: • Decrease in the savings rate could breath some life into 2012 2.2% consumer spending (frugal spending fatigue!) 2013 2.1% • Consumer credit resurfacing, but borrowing rate to stay 2014 2.7% below income growth • Income growth of 5 ‐ 6% needed to sustain economy R.K. Johns & Associates Inc. • The third pillar – government ‐ is missing in action! 6
U.S. Container I m port Trend 2 0 1 1 By Trade Partner % Chg. '11 vs. '10 0.9% N. Asia 10.6% N. Eur 0.9% S. Asia The Transatlantic w as the grow th w inner, 10.1% C. Amer. w hich resulted in m ore services & ( relatively) bigger ships for that trade 12.4% Med 2 0 1 2 : som e slow dow n due to econ. 2.3% India + stagnation but still O.K. ( N. Eur + 8 % , Med 9.5% WC S.Ame + 9 % ) 0.1% EC S.Ame 2 0 1 3 : if autos & housing lead US m oderate recovery ( & $ stays strong) , w estbound 7.9% Carib trade grow th should repeat ‘1 2 or touch + 1 0 % 5.4% Mid-East 6.6% Africa Oceania -6.0% 0 2 4 6 8 10 12 Million TEU, Source: PIERS R.K. Johns & Associates Inc. 7
U.S. Container Export Trend 2 0 1 1 By Trade Partner % Chg. '11 vs. '10 N. Asia 8.3% 6.5% N. Eur 4.2% S. Asia Med econ problem s already im pacted -3.4% Carib US exports last year 5.7% C. Amer. 2 0 1 2 : currency pressure & Europe’s 6.4% recession has pum m eled trade EC S.Ame ( N Eur -6 % , Med -1 1 % ) 6.1% Mid-East 2 0 1 3 : Transatlantic eastbound volum es 1.7% Med w ill likely rem ain flat, w ith a decent chance of upside grow th I F European 7.0% India + biz confidence returns 7.0% WC S.Ame 11.7% Africa 5.8% Oceania 0 1 2 3 4 5 6 R.K. Johns & Associates Inc. 8
Thank you ! Thank you ! Bill Ralph R. K. Johns & Associates 226 Chestnut St. Roselle Park NJ brrkja@aol.com 908 ‐ 245 ‐ 2181 R.K. Johns & Associates Inc. 9
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