The financial markets are posting new highs these days, but the worries about the economy slowing down continue to grow. For the time being, investors seem prone to take more risk, with the fear index pointing to extreme greed and this is driving the prices of some stocks up. But data from global trade is showing that the global economy is slowing, pointing to a possible decrease in consumer demand, writes eToro analyst for Romania, Bogdan Maioreanu.
In Romania, the latest data is showing that retail sales decreased by 1.5% in April 2023 compared with the same month last year, reversing a 5.4% growth in the prior month. The decrease is even greater when compared with March this year, at 5.2%. It was the first decline in retail activity since February 2021, due to lower sales for automotive fuels (-5.1% vs 4.7% in March) and non-food products (-0.3% vs 4.8%).
If we compare to other European countries, EU retail sales decreased by 2.6% over the same period. The largest decrease in the EU was in Hungary, 12.6%, followed by Estonia and Slovakia over 10%. Retail sales increased however, in the US by 1.6% and in China with 18.4%.
The shipping industry moves 90% of global trade, making it a real-time barometer of the economy’s evolution. Both dry bulk and container shipping rates have plunged from their pandemic highs. At its peak moving a 20 foot container from China to the US cost over 10.000 dollars. As supply-chains and goods demand normalized, these prices went down. The price for shipping a container on the China-Europe route by sea dropped below USD 1,000. The cost of sea transport of a container from China to North America plummeted to USD 1,200/TEU, and on the China-Middle East route to about USD 1,000/TEU. Bulk commodities prices remain down-pressured as China’s reopening disappointed the markets, and US and European import demand is running below pre-pandemic levels. The silver lining of the situation is that this has been a relief to global inflation worries.
Major carriers from container-giants Maersk (MAERSKB.CO) and Hapag Lloyd (HLAG.DE) to bulk leaders ZIM (ZIM) and Star (SBLK) are seeing a double hit of lower prices and weaker volumes. Container volumes remain under pressure from retailer inventory destocking. There is hope for a demand stabilization in the second half of the year but also some risk that new container ship capacity boosts supply and weakens prices. Their worries might be confirmed by another surprise mundane object: the cardboard box.
In 2022, in the US, the demand for corrugated cardboard boxes and other packaging material sank to levels not seen from the 2008 crisis. In 2023 the prospects are not great either. A survey on 32 independent US box-makers by FreightWaves revealed that respondents’ box shipments were modestly lower sequentially in the first quarter of 2023 compared to the fourth quarter of 2022. Their box shipments were down a substantial 12% versus a year ago in the first quarter. These companies don’t expect much sequential improvement in Q2 either, adding to the concerns about the slowdown of the economy.
