The economies of the state and Southern California are not expected to slide into a recession through 2009, though the days of booming growth in international trade industry are unlikely to return any time soon, according to a prominent Los Angeles economic group.
The annual Economic Forecast and Industry Outlook, released last week by the Los Angeles Economic Development Corp., found that increased competition from developing ports, such as Prince Rupert in Canada, is unlikely to allow the ports of Long Beach and Los Angeles to return to year-over-year double-digit increases in TEU volumes.
The report, headed up by noted Los Angeles economist Jack Kyser, said that while the weak dollar will continue to boost exports in the international trade sector, slowing demand for imports and rising truck and rail rates will result in a modest 2.8 percent increase in container volumes at the Southern California ports in 2008. This is compared to nearly a decade of double-digit container volume growth that peaked at the two neighboring ports in 2004 and 2005. Last year, the ports reported a 0.6 percent decline in container volume, the first time in recent memory that the two ports had reported a collective decline in volumes.
Negative forces easily outnumber the positive forces that will act on the Southern California international trade sector during 2008, the report predicts.
The feeling in the shipping industry that the two Southern California ports are putting environmental issues before business concerns will continue to put downward strain on the sector, as will the two ports inability to move forward with much needed infrastructure development -- ironically caused somewhat by environmental groups perceiving too much focus by the ports on business concerns, the report said.
The slowdown in the housing market, with some Southern California housing prices down more than 30 percent over the past two years, will continue to dampen consumer demand for furniture and household goods throughout 2008 and into 2009. The report forecasts that the Southern California housing slump is likely to continue in some areas through 2010.
The report also forecasts that retailers will continue to focus closely on supply chains, with the potential for more shifting of all-water services to the East Coast.
Federal regulation will also exert downward pressure on the international trade sector through the rest of the year. The federal government's new "10+2" security procedure, according to the report, is likely to increase supply chain costs and complexity for shippers, while the implementation of the federal Transportation Worker Identification Credential may exacerbate the local drayage driver shortage.
Not certain to the authors of the report, however, were industry concerns that the TWIC implementation would bring with it damaging effects to the industry. These effect, said the report, remain undetermined and will need to be assessed at a future date. Two separate container taxes implemented at the Southern California ports, totaling $45 per TEU and set to take effect in October, remain a question for the rest of the year said the LAEDC.
Despite the overwhelmingly dour tone painted by the forecast for 2008, the authors did find a bright spot in the sharp increase in U.S. exports. Attributed to the weak dollar, the trend is likely to continue throughout 2008, said the report.
Kyser and his team, in assessing the overall potential of the international trade sector, reaffirmed the sector's "B+"rating, the same the group offered to the sector last year, but slightly lower than the "A" grade received in 2006.
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