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TRANSCRIPT
The Global Economic Crisis
– Its Impacts on International Trade
and What It Means for the Future
Paul Bingham
Managing Director, Global Commerce and Transportation
IHS Global Insight
San Diego, CA June 22, 2010
Seminar for Members of Port Authority
Governing Boards and Commissions
Copyright © 2010 IHS Global Insight. All Rights Reserved.
2
Trade Demand Follows Recovery from Recession
• Trade demand recovery varies across a multi-speed world – Asia in
the fast lane, Europe in the slow lane, and the Americas in between
• Debt levels influence the speed and shape of the recovery by region
and country, most visible now in Southern Europe
• Asia is increasing its role in generating global growth and this is
evident in patterns of Western Hemisphere and world trade
• The long-term downward pressure on the U.S. dollar exchange rate
remains, even as it appreciates against the euro in the near term• Boosts U.S. export competitiveness; dampens import demand
• Near-term trade recovery will moderate after inventories are rebuilt;
long-term trade volumes still grow faster than the economy
Copyright © 2010 IHS Global Insight. All Rights Reserved.
3
-9
-6
-3
0
3
6
9
1974 1979 1984 1989 1994 1999 2004 2009 2014
Real GDP Industrial Production
(Percent change)
Recovery for the World Economy from the Worst
Recession of the Postwar Era is Well Underway
Source: IHS Global Insight
Copyright © 2010 IHS Global Insight. All Rights Reserved.
4
-15
-10
-5
0
5
10
GDP Private
Consumption
Fixed
Investment
Government
Consumption
Exports
2009 2010 2011 2012
(Percent change)
In World Economic Growth by Sector,
Trade Fell the Most and Comes Back Strongest
Source: IHS Global Insight
Source: IHS Global Insight
Copyright © 2010 IHS Global Insight. All Rights Reserved.
5
-4
-2
0
2
4
6
8
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
World Advanced Countries Emerging Markets
(Real GDP, percent change)
Emerging Markets Lead the Global Recovery
Source: IHS Global Insight
Copyright © 2010 IHS Global Insight. All Rights Reserved.
6
-6
-4
-2
0
2
4
6
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
United States Eurozone Japan
(Real GDP, percent change)
The United States Outpaces Europe and Japan
Source: IHS Global Insight
Copyright © 2010 IHS Global Insight. All Rights Reserved.
7
-10
-5
0
5
10
15
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
China India Brazil Russia
(Real GDP, percent change)
China and India Lead Growth in Emerging Markets
Source: IHS Global Insight
Copyright © 2010 IHS Global Insight. All Rights Reserved.
8
-6
-3
0
3
6
9
NAFTA Western
Europe
Japan Other
Americas
Emerging
Europe
Mideast-
N. Africa
Sub-
Saharan
Africa
Other
Asia-
Pacific
2009 2010 2011 2012
(Real GDP, percent change)
Uneven Economic Growth Affects Trade Potential
Source: IHS Global Insight
Copyright © 2010 IHS Global Insight. All Rights Reserved.
9
-15
-10
-5
0
5
10
15
NAFTA Western
Europe
Asia-
Pacific
Other
Americas
Emerging
Europe
Mideast-N.
Africa
Sub-
Saharan
Africa
2009 2010 2011 2012
(Percent change in industrial production)
Trade Shifts Vary with Industry Output by Region
Source: IHS Global Insight
Copyright © 2010 IHS Global Insight. All Rights Reserved.
10
The U.S. Recovery: Picking Up Steam
• Underlying 2010 U.S. GDP growth forecast 3.4%
• Steep recoveries usually follow steep recessions, but recoveries after
financial crises are usually slower
• Consumer spending growth faces the headwind of still-high
unemployment, but spending is now the strongest in three years
• Business spending on equipment (and services) and inventory
rebuilding are boosting growth, as seen in 2010 trade volumes so far
• Non-residential construction and state-and-local spending will be a
drag on the recovery of the economy into 2011
• Housing construction will struggle to get off the bottom
• Excess capacity will generally restrain wage and price inflation
Copyright © 2010 IHS Global Insight. All Rights Reserved.
11
-8
-6
-4
-2
0
2
4
6
8
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
3
4
5
6
7
8
9
10
11
Real GDP Growth (Left scale) Unemployment Rate (Right scale)
(Annual percent change) (Percent)
The U.S. Economic Recovery Advances
Employment Still in Slow Recovery
Source: IHS Global Insight
Copyright © 2010 IHS Global Insight. All Rights Reserved.
12
-10.0
-7.5
-5.0
-2.5
0.0
2.5
5.0
7.5
1990 1993 1996 1999 2002 2005 2008 2011 2014
U.S. Real GDP Industrial Production
(Percent change)
U.S. Industrial Production Outpaces Real GDP
Source: IHS Global Insight
Copyright © 2010 IHS Global Insight. All Rights Reserved.
13
2009 2010 2011 2012
Real GDP -2.4 3.4 2.8 3.0
Consumption -0.6 2.7 3.0 2.4
Residential Investment -20.5 3.1 23.1 23.7
Business Fixed Investment -17.8 3.3 7.7 10.1
Federal Government 5.2 3.6 -2.2 -3.8
State & Local Govt. -0.2 -0.8 0.5 0.4
Exports -9.6 12.0 6.7 6.8
Imports -13.9 12.0 8.5 5.5
(Percent change in value)
U.S. Economic Growth: Trade Fastest Growing
Sector in 2010 Yet Slowing Already by Year-end
Source: IHS Global Insight
Copyright © 2010 IHS Global Insight. All Rights Reserved.
14
Recovery Pace Varies by Business Size
Cyclical Indicators Rising; Small Business Lagging
30
35
40
45
50
55
60
2007 2008 2009 2010
80
82
84
86
88
90
92
94
96
98
100
ISM Manufacturing ISM Non-Manufacturing NFIB Small-Business
ISM Diffusion Indexes, 50 = breakeven NFIB Index,1986=100
Source: IHS Global Insight
Copyright © 2010 IHS Global Insight. All Rights Reserved.
15
-6
-4
-2
0
2
4
6
8
10
2000 2002 2004 2006 2008 2010 2012 2014
Durable Goods Nondurable Goods Services
(Percent change, chained 2005 dollars)
U.S. Consumer Spending Growth: Durable Goods
Most Volatile, Strong Influence on Trade Volumes
Source: IHS Global Insight
Copyright © 2010 IHS Global Insight. All Rights Reserved.
16
(Percent change annualized rate, volumes)
Inventory Cycle Boosts U.S. Exports and Imports
-40
-30
-20
-10
0
10
20
30
2007 2008 2009 2010 2011 2012
Real U.S. Exports Real U.S. Imports
Source: IHS Global Insight
Copyright © 2010 IHS Global Insight. All Rights Reserved.
17
Canada’s Economic Recovery Has Strong Exports
• Canada’s economic recovery is broadly based
• Domestic demand is strengthening with gains in consumer
spending, home-building, and business equipment investment
• Rising global demand for resources boost exports
• Western provinces will lead growth; Atlantic provinces will lag
• The Canadian dollar is expected to reach parity with the U.S.
dollar in 2010, then retreat as U.S. interest rates rise
Copyright © 2010 IHS Global Insight. All Rights Reserved.
18
Mexico’s Economy Linked to U.S. Trade Growth
• Mexico will benefit from sustained growth in the United States,
the destination for 80% of Mexico’s exports
• Currency adjustments have improved competitiveness
• Manufacturing is rebounding but construction remains weak
• Drug-related violence has hurt consumer confidence and
business investment, yet 2010 real GDP growth reaches 4.8%
• Declining oil production is a serious long-term problem
Copyright © 2010 IHS Global Insight. All Rights Reserved.
19
South American Economies Are Resilient
• The global economic recovery is boosting exports, capital
inflows, and remittances
• Compared with previous cycles, Latin America enjoys relative
economic stability; debt profiles have improved substantially
• Fiscal and monetary stimuli are supporting growth
• Long-term prospects are bright for countries attracting foreign
investment, including Brazil, Chile, Peru, and Colombia
• Policy mismanagement and resource nationalism will have
consequences in Venezuela, Bolivia, Ecuador, and Argentina
Copyright © 2010 IHS Global Insight. All Rights Reserved.
20
-4
-2
0
2
4
6
8
Brazil Argentina Venezuela Colombia Chile Peru
2009 2010 2011 2012
(Percent Change in Real Gross Domestic Product)
Brazil and Peru Lead GDP Growth in South America
Source: IHS Global Insight
Copyright © 2010 IHS Global Insight. All Rights Reserved.
21
Europe’s Recovery Path Will Be Uneven
• Greece’s debt crisis exposed Euro currency zone’s fault lines
• Labor cost trends created north / south competitiveness divide
• Credit conditions will remain tight for an extended period
• Inevitable fiscal tightening will be a drag on growth and trade
• High unemployment and weak wage gains will restrain
consumer spending and housing investment and imports
• An improving global economy and weak euro will spark export
growth as region’s exports become more competitive abroad
Copyright © 2010 IHS Global Insight. All Rights Reserved.
22
Japan’s Growth Depends on Exports
• Japan’s growth picked up in late 2009 and early 2010, with
gains in exports, consumer spending, and capital expenditures
• Industrial production is rebounding from a sharp decline
• Yet, high unemployment will restrain household spending, while
excess capacity limits the rebound in investment
• Deflation is a persistent threat
• The economy remains overly dependent on exports
• Japan’s population has entered a long-term decline
Copyright © 2010 IHS Global Insight. All Rights Reserved.
23
Asia-Pacific Region Leads the Global Recovery
• The region weathered the financial crisis better than most
• Domestic demand is growing at a healthy pace
• Exports are rebounding from sharp declines
• Fiscal and monetary policies will gradually tighten
• Inflation is edging upward but should not be problematic
• Asset price bubbles are a real and significant risk
Copyright © 2010 IHS Global Insight. All Rights Reserved.
24
China’s Economy Begins to Decelerate as
Inflationary Pressures Build
• China’s growth is re-balancing, as exports are recovering and
stimulus-led investment decelerates
• Consumer spending continues to grow rapidly, boosting imports
• Inflationary pressures and property bubbles are prompting a
gradual tightening of fiscal and monetary policies
• Renminbi currency exchange rate appreciation is expected to
resume later this year, dampening export competitiveness
• Real GDP is projected to increase 11% for 2010 and average
8% annually over the next ten years
• China’s nominal GDP is forecasted to overtake Japan’s in value
this year and the United States’ in 2022
Copyright © 2010 IHS Global Insight. All Rights Reserved.
25
(Percent change from year earlier)
-30
-20
-10
0
10
20
30
40
50
2006 2007 2008 2009 2010
Industrial Output Real Merchandise Exports
Real Fixed Investment Real Retail Sales
China’s Domestic Growth Moderates
as Exports Rebound
Source: IHS Global Insight
Copyright © 2010 IHS Global Insight. All Rights Reserved.
26
2009 2010 2011 2012
Real GDP 8.7 10.9 8.6 8.2
Private Consumption 7.7 8.5 8.9 9.1
Fixed Investment 17.0 15.6 8.0 7.7
Government Consumption 14.4 15.2 12.1 10.7
Exports -14.0 14.2 10.1 12.6
Imports -9.6 17.0 11.6 12.8
(Percent change)
China’s Real Economic Growth by Sector
Source: IHS Global Insight
Copyright © 2010 IHS Global Insight. All Rights Reserved.
27
India’s Economic Growth Includes Trade
• Strong, broadly based growth will be sustained
• Capital inflows will strengthen with a new wave of economic
reforms and further integration into the global trade economy
• Information technologies industries continue to expand rapidly
• Higher in inflation will bring further monetary tightening
• The new government budget tackles fiscal consolidation and
infrastructure issues, both lingering problems
• Demographic trends are favorable for trade; infrastructure is not
Copyright © 2010 IHS Global Insight. All Rights Reserved.
28
Middle East and North Africa: Growing but Not
as Dynamic as Asia
• Rising oil prices and demand have sparked economic growth
• Strong public spending and investment are leading recovery
• Businesses and households remain cautious
• Headwinds from weak property markets and banking problems
• Qatar, UAE, and Saudi Arabia are trying to diversify
• Young, growing populations enhance growth prospects
• Hazards: opaque counterparts, cultural resistance, politics
Copyright © 2010 IHS Global Insight. All Rights Reserved.
29
Sub-Saharan Africa Faces Continued Economic
Development and Trade Challenges
• Commodity price fluctuations continue to affect growth
• Exports to Asia and FDI from China are gaining importance
• The 14 countries that peg their currencies to the euro will
benefit from improving export competitiveness
• The downsides of the Eurozone debt crisis are reduced trade,
remittances, aid, and FDI from that region
• Poor infrastructure, political instability, and corruption will
remain constraints on economic development and trade
• Management of mineral resources will be key to economic
diversification and poverty reduction
Copyright © 2010 IHS Global Insight. All Rights Reserved.
30
World Trade Recovery by Commodity is Not Uniform,
as the Stage of Recovery Varies By Industry Sector
• Manufacturing recovery best for Autos, Metals, Chemicals
and Commodities
• Output won’t reach pre-recession levels for several years
• Spiking commodity prices challenge sectors that use
them
• Strong recovery for Information, Technology and
Communications, recovering to former levels and above
• Banking / Finance stabilizes in U.S. (2010) and Europe (2011),
but recovery is affected by bad loans and de leveraging
• Commercial / consumer credit availability still constrained
• Construction and related trade faces disappointing markets
Copyright © 2010 IHS Global Insight. All Rights Reserved.
3131
Global Merchandise Trade Recovers by Next Year
Maritime Trade Remains Dominant in Global Trade
0
50
100
150
200
250
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Air Sea Land/Other
(Trillions of U.S. dollars)
Source: IHS Global Insight World Trade Service
Copyright © 2010 IHS Global Insight. All Rights Reserved.
32
Risks to the Global Economic and Trade Forecast
Downside Risks
• Bursting of asset and/or commodity price bubbles
• Sovereign debt crisis
• Continuing financial stress
• Premature policy tightening
• Trade protectionism
Upside Risks
• Stronger spending from pent-up demand
• Prolonged growth surge in Asia
• More rapid innovation and productivity growth
Copyright © 2010 IHS Global Insight. All Rights Reserved.
33
Recession Impacts on Trade
Trade recession led to underutilized port system capacity across berths and terminals, as well as for related railroads, trucking, warehousing and labor. Providers reduced deployed capacity where they could.
Globalization of trade and capital flows means increased business cycle synchronization and ongoing risk from greater volatility
Consequences:
• Trade recovery faces capacity bottlenecks; vessel cargo capacity not back to pre-recession levels, despite reduced size of idled ship fleet.
• Inland cargo captured by truck from intermodal rail during recession likely to shift back again, as rates and relative costs of trucking increase
• Continued evolution of trade gateways from shipper demands and carriers optimizing operations and services under tight conditions
Thank you!
Paul Bingham
Managing Director, Global Commerce and Transportation
202.481.9216