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Trade: The Global Recession and Future Prospects

Trade: The Global Recession and Future Prospects. Jon Haveman. Founder and Principal, Beacon Economics. • Global trade • US trade • Trade through California • Future prospects for trade – US – California • Competitive Pressures • Summary. World Trade Experienced an

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Trade: The Global Recession and Future Prospects

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  1. Trade: The Global Recession and Future Prospects Jon Haveman Founder and Principal, Beacon Economics

  2. • Global trade • US trade • Trade through California • Future prospects for trade – US – California • Competitive Pressures • Summary

  3. World Trade Experienced an Unprecedented Collapse

  4. Trade Decline in Historical Perspective

  5. Exports Have Declined for ALL Countries

  6. …and Relative to Recent Recessions

  7. Four Major Traders w/Major Trade Contractions

  8. • Trade fell for all countries • Trade fell across all commodities • Trade fell by about 4.8 times more than world GDP – Integrated supply chains: same value added crosses multiple borders before delivery • Why? – Commodity prices tumbled – Consumers and producers in US and elsewhere came to a standstill in late 2008

  9. 08-II 13415 09-II 12901 Ch Cont. GDP -3.8% Worst 4 Quarter Contractions Personal consumption Durable goods Nondurable goods Services 9351 1175 2081 6092 9189 1071 2025 6078 -1.7% -8.8% -2.7% -0.2% -1.2% -0.8% -0.4% -0.1% 2009-II -3.8% 1958-I -3.0% Gross investment Structures Equipment software Residential 2026 493 1097 462 1456 -28.1% 400 876 344 -4.2% -0.7% -1.6% -0.9% 1982-III -2.7% -18.9% -20.2% -25.6% 1954-II -2.5% 1975-I -2.3% Net exports Exports Imports -476 1670 2146 -330 1419 1749 1.1% -1.9% -3.0% 1980-III -1.6% -15.0% -18.5% 1961-I -1.0% Government National defense Nondefense State and local 2506 645 315 1546 2568 695 328 1548 2.5% 7.7% 3.9% 0.1% 0.5% 0.4% 0.1% 0.0% 1991-I -1.0% 1970-IV -0.2% Total Inventories 1835.5 1750.2 -4.6%

  10. Gross Domestic Product Gross Domestic Consumption 8 8 6 6 4 4 2 2 0 0 -2 -2 -4 -4 -6 -6 -8 -8 2006-III 2006-I 2007-I 2007-III 2008-I 2008-III 2009-I 2009-III 2006-I 2006-III 2007-I 2007-III 2008-I 2008-III 2009-I 2009-III

  11. U.S. Trade California Trade 200 200 180 180 Index (2002 = 100) Index (2002 = 100) 160 160 140 140 120 120 100 100 80 80 2007 2004 2008 2000 2001 2002 2003 2004 2005 2006 2008 2009 2000 2001 2002 2003 2005 2006 2007 2009 Exports Imports Exports Imports

  12. GDP Growth 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% -8.0%

  13. Vehicle Sales (SAAR) Retail Sales (Excl. vehicles, SA) 17 315 16 310 15 305 14 300 Millions 13 $ Bill. 295 12 290 11 285 10 280 9 275 8 Sep-07 Sep-08 Sep-09 Jan-07 May-07 Jan-08 May-08 Jan-09 May-09 Jan-10 Oct-07 Oct-08 Oct-09 Jul-07 Jul-08 Jul-09 Jan-07 Jan-08 Jan-09 Jan-10 Apr-07 Apr-08 Apr-09

  14. Savings as Share DPI Share of GDP 9% 71% 0% Consumers 8% 70% -1% 7% 69% -2% 6% 68% -3% 5% 4% 67% -4% 3% 66% -5% Net Trade 2% 65% -6% 1% 64% -7% 0% 1997-I 1989-I 1991-I 1993-I 1995-I 1999-I 2001-I 2003-I 2005-I 2007-I 1996-I 1986-I 1988-I 1990-I 1992-I 1994-I 1998-I 2000-I 2002-I 2004-I 2006-I

  15. Private Savings and Real Household Gross Worth Debt to Income Ratio 1.3 14% $750 1.2 $700 12% 1.1 $650 10% 1 $600 8% $550 0.9 $500 6% 0.8 $450 0.7 4% $400 0.6 2% $350 0.5 0% $300 1970Q1 1973Q2 1976Q3 1979Q4 1983Q1 1986Q2 1989Q3 1992Q4 1996Q1 1999Q2 2002Q3 2005Q4 2009Q1 0.4 1960Q1 1964Q1 1968Q1 1972Q1 1976Q1 1980Q1 1984Q1 1988Q1 1992Q1 1996Q1 2000Q1 2004Q1 2008Q1 Savings Household Wealth

  16. • 30% of all imports • Categories: – Vehicles – Toys – Furniture – Apparel – Footwear

  17. California Imports 180 170 160 150 Index (2000 = 100) 140 130 120 110 100 90 80 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Imports Top Imports

  18. U.S. Consumption Forecast 130 125 120 Index (Q1-02 = 100) 115 110 105 100 95 90 2003-Q1 2000-Q1 2001-Q1 2002-Q1 2004-Q1 2005-Q1 2006-Q1 2007-Q1 2008-Q1 2009-Q1 2010-Q1 2011-Q1 2012-Q1 2013-Q1 2014-Q1 2015-Q1

  19. Real Spending 9400 Spending as Percent of Income 9300 92-IV 08-I 09-IV 9200 9100 Savings 6.5% 1.0% 4.2% 9000 Spending 79.2% 83.1% 84.0% 8900 Taxes 11.6% 12.6% 8.8% 8800 2006-I 2007-I 2008-I 2009-I 2006-IV 2007-IV 2008-IV 2009-IV 2006-II 2007-II 2008-II 2009-II 2006-III 2007-III 2008-III 2009-III

  20. U.S. Trade Forecast 170 Forecast 160 150 Index (Q1-02 = 100) 140 130 120 110 100 90 2001-Q1 2004-Q1 2000-Q1 2002-Q1 2003-Q1 2005-Q1 2006-Q1 2007-Q1 2008-Q1 2009-Q1 2010-Q1 2011-Q1 2012-Q1 2013-Q1 2014-Q1 2015-Q1 Exports Imports

  21. Year of Return to 2006 Peak `07-09 Decline: Subsequent Growth Rate: 3% 5% 10% -20% 2020 2016 2014

  22. • Prolonged global economic downturn will exert significant downward pressure on trade for some time • The death of the American consumer will affect U.S. imports going forward – Growth will be slower and from a lower level • Ports that were pushing their capacity in 2006 have 3 to 6 years of breathing room

  23. • Reduced competitiveness v.v. EC ports • Increased competition on WC – Canada – Mexico – Panama Canal

  24. • Loss of jobs • Loss of local revenues • Reduction in emissions • Lower infrastructure obligations • Better service for local shipments

  25. • Ports and Employment – Goods movement seen as wave of employment future – Logistics jobs taking over for manufacturers as source of good jobs for unskilled workers • Conventional wisdom – Port activity creates jobs with high wages and upward mobility

  26. • Wages: – MEAN wages for logistics: – MEDIAN wages for logistics: – Bottom quartile: • Upward mobility is limited – Job prospects 18-1 in favor of low skilled • Quantity – Not high in LA region relative to other cities $47,000 $32,000 $18,000

  27. • Trade will not stage a dramatic comeback • Imports through California will be particularly slow • There are threats to the continued dominance of the SoCal ports, but is that a “problem”? • California will always have important global gateways

  28. To view or download this presentation please visit: www.BeaconEcon.com Beacon Economics is an independent research and consulting firm with offices in both Northern and Southern California. Contact us at 415-457-6030

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