West Coast port activity implies that the supply shock affecting the domestic economy is broad and deep.
This strongly suggests a sharp decline in consumption and industrial activity as firms struggle to acquire supplies to make final goods and consumers pull back because of a lack of finished goods on the shelves.
Imports at the Los Angeles seaport are down 22% from a year-ago February.
Without a doubt, this also implies an increase in unemployment in the trade and transport sectors supported by trade and shipping.
Imports at the Los Angeles seaport are down 22% from a year-ago February, the largest drop in six consecutive months of declining imports at the gateway for Asia-produced goods.
It’s not alone: Import activity at all West Coast seaports are in decline, first as a result of the U.S.-China trade war, and now as the coronavirus shuts down production by our Asian trading partners.
The drop in imports implies a continuation of the supply shock facing U.S. consumers once their panic buying subsides. The lack of imports from Asia will make it even more difficult to restock empty shelves once inventories are exhausted.
And with income streams threatened by business closings and with consumers sheltering in place, we expect an eventual drop in consumer spending on non-durables, to be followed by decline in spending on durable goods.
The lack of overall activity at the West Coast seaports (measured by the decline in shipping containers loaded with imports and exports) points to a decline in U.S. economic growth.
We would argue that the impact of ignoring the growing importance of Asia in the global supply chain — and then the impact of the pandemic on our trading partners’ demand for U.S. exports — is becoming obvious.
Though not a perfect predictor of GDP growth, the drop in West Coast port activity in 2000-1, 2007-10, and now since 2017 would suggest a further slowdown in overall U.S. economic growth.