Shipping Containers and Their Relevance [VIDEO]

The Fed's goal of slowing demand through higher interest rates is working.  The U.S. inflation rate slowed to 5% in March compared to the previous one-year period.  That's down from June 2022's reading of 9.1%, which was a 40-year high.  The last time we had inflation this low was May 2021. 

While still elevated, inflation is moderating and the number of shipping containers coming into U.S. ports helps tell the story.  Why are shipping containers relevant? The volume of loaded container imports can act as a predictor of economic activity.  Shipping containers represent expected demand for goods, which is closely connected to consumer spending and overall economic growth.

Figure 1 graphs the total loaded container imports across six major U.S. ports every month for the last five years:

The years 2018 and 2019 establish a pre-pandemic baseline, including seasonal trends, for monthly container imports. Container volumes were normal in January 2020 but then plunged in February and March and remained weak for multiple months as the pandemic shut down the global economy. Import volumes rebounded in the second half of 2020 as the economy reopened (see the yellow arrows above) and remained above-average in 2021 as consumers spent heavily on goods. Container volumes peaked in May 2022, but since then, have declined in seven of the last nine months. February 2023’s import volume was the third lowest month in the last five years, behind only February and March 2020 in the early months of the pandemic.

What is the data telling us? Fewer container imports indicate the economy continues to revert to pre-pandemic norms. This drop should continue to help alleviate supply chain bottlenecks and ease inflationary pressures - positive developments for consumers.  In addition, the decline in container imports helps explain the recent slowdown in the economy. In the first quarter of 2023, Gross Domestic Product (GDP) grew at an annualized rate of 1.1%.  That's slower than the 3.2% and 2.6% GDP growth rates in the third and fourth quarters of 2022, respectively.

So far, the Federal Reserve’s interest rate hikes have reduced demand and eased inflation without tipping the U.S. economy into recession.  That's been good news for stocks and bonds through the first 4 months of the year.

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