You may have read a story in the New York Times earlier this week that cited “A Contradiction in the Cargo,” quoting some port officials as saying their cargo volume doesn’t match up with NRF’s forecast for 2.8 percent growth in retail sales during the holiday season or the numbers in our monthly Global Port Tracker report.
Unfortunately, this story tried to make a correlation between retail cargo volume and retail sales that simply doesn’t exist – at least not as closely as the story would suggest.
NRF launched Global Port Tracker in 2005 to measure and forecast cargo volume at the nation’s largest retail container ports in order to help retailers avoid congestion, labor shortages and other issues that might disrupt their supply chains. Since then, it has become a respected leading indicator of the retail economy, with the Federal Reserve among its subscribers.
Cargo volume is an indicator of what retailers expect in sales – retailers try very hard not to import merchandise they don’t think they can sell. But we have always emphasized that it is only a very rough indicator. A container of white cotton t-shirts counts the same as a container of big-screen TVs. Cargo is a barometer, but only one of many factors that go into economic forecasts on retail sales.
This week’s story took issue with the fact that ports saw a decline in retail cargo volume this summer compared with the summer of 2010, and quoted officials who questioned whether that was in line with our forecast for holiday sales growth.
Cargo numbers for June, July and August this year were, in fact, down compared with the same months last year. But the reason has little to do with the current economy or sales expectations. What happened was this: After the recession hit its peak in 2009, ocean carriers saw a huge decrease in business and many of their ships were left idle. In response, they began taking even more ships out of service in what appeared to be an attempt to artificially decrease the supply of cargo capacity and drive up rates charged to retailers – an issue investigated by the Federal Maritime Commission. Retailers who refused to pay the higher rates in early 2010 saw some of their cargo left on the docks in China to the point that some seasonal spring and summer products arrived too late to be sold.
Having merchandise arrive too late was a risk retailers obviously couldn’t take for the all-important holiday season. In response, many retailers last year brought holiday merchandise into the country significantly earlier than usual. While October is traditionally the busiest cargo month of the year, last year’s peak hit in August, with even June and July seeing numbers that would not normally be seen until October.
Cargo numbers this summer did show a decline compared with last year. But that’s because last year’s numbers were artificially high. This year’s numbers are actually at a normal level, comparable to what was seen in 2008, though still short of the pre-recession peaks of 2007.
This year, year-over-year cargo gains resumed in September at 2.7 percent. And Global Port Tracker, produced for NRF by Hackett Associates, is currently forecasting that each of the remaining months of this year should see a cargo increase of at least 2.6 percent over last year. October is expected to resume its role as the peak of the shipping cycle. Those numbers appear very close to our forecast for a 2.8 percent increase in sales, but keep in mind that cargo and sales are two different measurements. Nonetheless, NRF is confident that retailers will succeed in maintaining the careful balance between inventory and sales that keeps customers happy while keeping retailers profitable.