Shipping Imports Slipping While Companies Are ‘Burning Off’ Inventories
Date: Thursday, November 7, 2019
Source: Wall Street Journal
U.S. logistics operators say shipping imports are waning heading into the holidays in a sign that companies may be paring down inventories after stocking up heavily to get goods in place ahead of new tariffs.
“There was a larger inventory pull-forward earlier this year when people were concerned about the tariffs,” David Yeager, chief executive of transportation company Hub Group Inc., said in an interview. “There’s not as much freight demand at this point in time…People are burning off inventory.”
Mr. Yeager said Hub Group, whose customers include large retailers, is seeing lower volumes than its customers had projected. Those forecasts had indicated the 2019 peak might be on par with 2017, though lower than last year, when imports into Southern California and some large East Coast ports surged as retailers and manufacturers pulled orders forward ahead of new rounds of tariffs.
Although some retail clients are bringing in more goods, he said, “it was delayed, the peak, and certainly not as intense as we had anticipated.”
Household spending increased heading into the fourth quarter but consumers are spending at a less robust pace than last year. U.S. imports of consumer products such as cellphones, toys and apparel plunged in September, with imports of goods from China down 4.9% from August, the Commerce Department said this week.
At the neighboring ports of Los Angeles and Long Beach, which together make up the biggest U.S. gateway for the container trade in retail consumer goods, combined loaded imports fell 1.9% in September from a year ago.
A measure of logistics-sector activity, the Logistics Managers Index, slowed last month to the lowest level in the three years of the survey, although it still showed business activity increasing. “Inventory seems to be growing more slowly than we would normally anticipate for this time of the year as firms prepare for the holiday shopping season,” the report said.
Mr. Yeager said discussions with customers point to “a softness in the freight market with inventories getting cleared out and a little bit of uncertainty with the political climate.”
He said the company expects “a bit of a peak through Thanksgiving,” although “We’ve seen so many of our clients miss their forecasts this year on where they thought volumes would be that we’re a little skeptical.”