Forecasting Global Trade in a Pandemic, Part II

As some nations have begun to slowly reopen following weeks of lockdown from the coronavirus pandemic and many U.S. states are doing the same, we have to consider how long it will take until things return to where they were. That requires us to answer three questions: how long will the economic downturn last, how severe will it be, and how quick is the recovery?

Our forecast for cargo volume is based on one primary assumption: there will be no major return of the coronavirus later this year. Our outlook for the other three questions is that the downturn will be sharp, but that a recovery will begin to occur in the third quarter, picking up steam in the final quarter of the year. In our opinion, though, it will take longer still for things to fully recover.

Last month we noted the uncertainty over how significant the decline would be. As it turns out, first-quarter gross domestic product in both the United States and Europe came in even lower than anticipated: the U.S. Bureau of Economic Analysis reported that the economy shrank by 4.8 percent compared with expectations of a 3.5 percent decrease, with consumer expenditures down 7.6 percent. Eurostat, meanwhile, reported that first-quarter GDP for the euro area decreased by 3.3 percent year-on-year.

Retail sales did not fare well either. The U.S. Census Bureau said retail sales in March dropped 8.7 percent seasonally adjusted from February and 6.2 percent unadjusted year-on-year. Eurostat reported that the seasonally adjusted volume of retail trade in the euro area decreased by 11.2 percent in March compared with February and by 9.2 percent year-on-year.

How will this impact North American containerized imports? One factor is that the millions made unemployed during this crisis combined with millions more who have concerns about suffering a similar fate will be less able or willing to spend even as shops start to reopen. That will mean less demand for goods, less merchandise purchased by retailers, and depressed import volumes over the coming year.