Throngs of 18-wheelers are the clearest sign of brisk activity at the Port Newark-Elizabeth marine terminals in northern New Jersey, defying talk of a US economic slowdown.
Last week, the Port of New York and New Jersey reported that its June 2022 volumes were the second-highest in history, capping a torrid semester that has overtaken the first half of the record-setting 2021 year by 11.4 percent.
“Volumes continue to be extremely strong,” said Michael Bozza, assistant director of commercial development at the Port of New York and New Jersey, who nonetheless expects a moderation in activity later in 2022, partly due to inflation.
Bozza said warehouses, freight rail and other supply chain nodes remain “stressed” and are at or near capacity. Some of the cargo is being held for later in the year as importers shift from a “just in time” strategy to “just in case,” he said.
A key report Thursday could show the US economy technically entered recession last quarter. But the nation’s ports tell a different story.
“Are we seeing an economy that’s screeching to a halt? No, we are not,” said Phil Levy, chief economist of Flexport, a freight forwarding company. “We are seeing continued imports. We are seeing continued consumption.”
That persistent deluge of imports — which is also playing out at other key US container ports such as Los Angeles and Savannah, Georgia — is one reason logistics experts remain cautious about the state of the US supply chain, even though ports no longer face the backlogs of last fall.
New problems sometimes surface quickly, as was the case last week, when protests from truckers over a newly implemented California law effectively halted deliveries at the Port of Oakland, another of the nation’s larger container ports.
Normal operation has since resumed, but the incident underscores the brittle state of play for overtaxed US infrastructure during the pandemic.
“There’s not a lot of slack in the system when something goes wrong,” said Sal Mercogliano, a maritime historian at Campbell University in North Carolina.
“While the economy is slowing and inflation is rising, people are still buying a lot.”
– Rail bottleneck –
Worries in the United States about the supply chain hit a peak last fall when dozens of stalled vessels of the Ports of Los Angeles and Long Beach sparked worries of a spartan holiday season.
Those fears proved overwrought. To secure merchandise, retailers took extraordinary measures, making greater use of air cargo and in some cases chartering their own vessels to keep store shelves full.
Most major ports no longer have big backlogs, but there are other problems in the system.
Gene Seroka, executive director of the Port of Los Angeles, recently highlighted freight rail delays as a worry. He pointed to an excess of some 20,000 rail containers stuck on the facility.
“We must take action on this immediately to avoid a nationwide logjam,” Seroka said two weeks ago.
At least part of the problem in rail transport stems from staff cutbacks at freight rail companies such as CSX and Union Pacific in the years immediately preceding the pandemic.
“The rail is a big piece of why things are still snarled up,” said Jason Miller, a supply chain management professor at Michigan State University, who notes that overall freight rail employment is about 40,000 below its level in 2016.
The unresolved state of labor talks between rail companies and rail worker unions also adds unease. The two sides have been unable to reach an accord on a contract to oversee wages, health care and working conditions.
On July 15, President Joe Biden blocked a freight railroad strike for at least 60 days, signing an executive order to establish an arbitration system to resolve the conflict.
Another outstanding labor issue is the contract for West Coast longshoremen, which expired at the end of June. Again, there has been no strike as the two sides continue negotiations.
East Coast ports such as New York and others in the Gulf Coast have picked up incremental business from shippers worried about strike risk, as well as a repeat of last fall’s travails in Los Angeles and Long Beach.
Bozza estimates that about seventy percent of the New York and New Jersey port’s new volumes in 2022 is displaced cargo from the West Coast.
Despite these issues, Miller does not expect a repeat of last fall’s crisis, saying, “We’re in a better place than we were eight or nine months ago.”
“There’s a lot of uncertainty over just how much spending power the US consumer has this holiday season,” said Miller, who pointed to China’s zero-tolerance Covid-19 policy as another big supply chain wildcard.
But Levy of Flexport notes that port delivery times, while improving, are still running much longer than in the pre-pandemic period.
“We are still experiencing ample supply chain difficulties,” Levy said. “Lately, we’ve seen ports do better and rail do worse.”
Sony trims annual profit forecast after Bungie purchase
Sony trimmed its annual net profit forecast on Friday, partly due to acquisition expenses including the purchase of US game studio Bungie, creator of hits like “Halo” and “Destiny”.
The PlayStation maker announced in February it would buy Bungie for $3.6 billion, weeks after rival Microsoft unveiled a landmark pact to acquire “Call of Duty” maker Activision Blizzard.
Microsoft says its massive merger, valued at around $69 billion, will make it the third-largest gaming company by revenue, behind Tencent and Sony — marking a major shift in the booming gaming world.
Sony Group now predicts net profit for 2022-23 will total 800 billion yen ($6 billion), down from the 830 billion yen previously forecast.
It said the expected increase in acquisition expenses was “mainly due to the acquisition of Bungie, Inc. being completed earlier than the assumed timing”.
Lower sales of games by non-house developers will likely dent its overall sales figures this financial year, it said, but this would be “partially offset” by a weaker yen.
Exchange rates also boosted the conglomerate’s movie segment, chief financial officer Hiroki Totoki told reporters.
Customer traffic at US theatres has returned to pre-pandemic levels in some weeks, and Sony Pictures is hoping to score another box-office win after the runaway success of “Spider-Man: No Way Home”.
“We have high hopes for ‘Bullet Train’ featuring Brad Pitt,” Totoki said.
The movie division expects higher sales for anime streaming, “including the impact of the acquisition of Crunchyroll”, the world’s largest online library of Japanese animation.
– PlayStation 5 sales steady –
In the April to June quarter, the Japanese conglomerate posted a three percent year-on-year rise in net profit to 218 billion yen, with sales up around two percent to 2.3 trillion yen.
Sony has faced challenges rolling out its PlayStation 5 console, which remains difficult to get hold of more than 18 months since its launch in November 2020, in part due to pandemic supply chain disruption and the global chip shortage.
Sony sold 11.5 million PS5s last year, and in May Totoki said the firm was adapting to try and weather ongoing supply chain issues, including Covid-19 lockdowns in China.
For the PS5, “the problem is more about supply than demand. The company is also facing problems transporting its products,” Hideki Yasuda, senior analyst at Toyo Securities, told AFP before the earnings release.
Meanwhile “the yen has turned lower in this quarter. This should be positive for the company,” he said, adding that a US economic slowdown could open up shipping spots, even though it poses risks overall for businesses like Sony.
In the first quarter of this financial year, Sony sold 2.4 million PS5 units, similar to the same period last year when it sold 2.3 million.
Sony also said last month it is launching a new brand that will offer PC gaming gear.
The gaming peripherals market of items used by players was valued at $3.88 billion globally in 2019 according to Grand View Research.
Asian markets rise as US data boosts hopes of slower Fed hikes
Asian stocks rose Friday after data showing another contraction in the US economy boosted hopes that the Federal Reserve will slow its pace of interest rate hikes.
After an extended period of pessimism on trading floors fuelled by soaring inflation and the central bank’s monetary tightening campaign, investors are beginning to speculate that the market may have reached its nadir.
The world’s top economy shrank 0.9 percent in April-June following a 1.6 percent retreat in the first quarter as it was buffeted by the four-decade spike in inflation and rising borrowing costs.
But the reading was taken as a sign of good news, as it could give the Fed room to take its foot off the pedal, with Treasury yields — considered a barometer of future interest rates — easing.
Officials are expected to continue lifting rates, but analysts estimate they will announce a 50-basis-point rise in September, compared with 75 at the past two meetings.
And analysts said the quick, sharp pace of increases would allow the bank to begin cutting sooner in 2023 while others said any recession would likely only be shallow and short.
The news saw all three main indexes on Wall Street rally more than one percent, with tech firms — which are susceptible to higher rates — leading the way.
The gains extended a rally Wednesday that came after Fed chief Jerome Powell hinted that the bank could start to take it easier in its tightening.
Most of Asia followed suit, with Tokyo, Sydney, Seoul, Singapore, Taipei, Jakarta and Wellington all up. However, Hong Kong dropped and Shanghai struggled.
The prospect of US rates not rising as fast as previously expected hit the dollar, which has soared in recent months against most other currencies.
The greenback dropped below 135 yen Thursday for the first time since July 6, having hit a 24-year high of 139.39 yen just two weeks ago.
A second successive contraction is widely considered a technical recession, though it is not officially considered so in the United States until identified as such by the National Bureau of Economic Research.
But while debate rages over that issue, the general consensus is that the economy is struggling.
“The more important point is that the economy has quickly lost steam in the face of four-decade high inflation, rapidly rising borrowing costs, and a general tightening in financial conditions,” Sal Guatieri, of BMO Capital Markets, wrote.
The retreat in the US economy comes as China also struggles, hit by painful Covid-induced lockdowns in major cities including Shanghai and Beijing that hammered all sectors and supply chains.
On Thursday, the country’s leadership offered a dour assessment of the world’s number two economy but offered no plans to stimulate growth, leaving traders disappointed.
– Key figures at around 0230 GMT –
Tokyo – Nikkei 225: UP 0.5 percent at 27,944.55 (break)
Hong Kong – Hang Seng Index: DOWN 1.4 percent at 20,343.08
Shanghai – Composite: DOWN 0.4 percent at 3,269.18
Dollar/yen: UP at 134.36 yen from 134.25 yen Thursday
Euro/dollar: DOWN at $1.0193 from $1.0197
Pound/dollar: DOWN at $1.2167 from $1.2177
Euro/pound: UP at 83.77 pence from 83.70 pence
West Texas Intermediate: DOWN 0.8 percent at $97.16 per barrel
Brent North Sea crude: UP 0.3 percent at $107.50 per barrel
New York – Dow: UP 1.0 percent at 32,529.63 (close)
London – FTSE 100: FLAT at 7,345.25 (close)
Amazon tops expectations as quarterly sales climb
E-commerce colossus Amazon on Thursday reported that its sales in the recently ended quarter grew more than expected despite inflation and other economic turmoil.
Amazon sales topped $121 billion in the quarter, but the company logged a loss of $2 billion dollars as it continued to work to rein in costs — but its shares still jumped 10 percent in after-hours trading.
A crowded period of earnings from the world’s biggest tech firms has mostly disappointed, but investors have seemed relieved the news was not worse.
Recession fears, a strong dollar, shrinking advertising budgets and inflation — tech companies’ pandemic-era booms have now tipped into a downturn.
Microsoft and Facebook-owner Meta both cited the harm to their business from a strong dollar, with the social media giant pointing to the greenback’s role in the firm’s first year-on-year revenue decline since going public in 2012.
In addition to the generally bumpy economic times, firms such as Netflix and Meta are fighting fierce competition from rivals — and both reported losing some ground.
Meta lost about two million monthly users between quarters, and Netflix shed nearly a million paying customers, which was less than expected.
Yet Netflix stock is up about a percent in the past five days, with investors potentially hopeful after the firm projected a coming rebound in subscribers.
Markets seemed similarly assuaged despite Google parent Alphabet missing on revenue and profit.
The Silicon Valley giant’s bad news was not unexpected, as the flow of online ad dollars that fuels the company’s fortunes has slowed as inflation, war and other troubles vex the overall economy.
“Still, with its tremendous market share in search advertising, Google is relatively well positioned to weather the rough waters that lie ahead,” said analyst Evelyn Mitchell.
As advertisers have tightened their belts, and Apple’s privacy changes have bitten into firms’ sales of costly but highly targeted ads, the damage was uneven.
Meta’s income has taken a beating, and with a share price that has lost about half its value since February, it’s clear that investors are still wary about the company’s future.
Analysts noted Meta’s reported 14 percent drop in average price per ad was a steep change coming on top of the first quarter, when ad prices dipped 8 percent.
“The good news, if we can call it that, is that its competitors in digital advertising are also experiencing a slowdown,” said analyst Debra Aho Williamson.
Snapchat’s parent firm, for example, reported that its loss in the recently ended quarter nearly tripled to $422 million despite revenue increasing 13 percent under conditions “more challenging” than expected.
“We are not satisfied with the results we are delivering, regardless of the current headwinds,” California-based Snap said in a letter to investors last week.
Business2 months ago
Shanghai eases Covid curbs in step towards ending lockdown
Business2 months ago
Shanghai euphoria tempered by deep wound to China’s economy
Business1 month ago
How can organizations beat the digital transformation odds?
Technology1 month ago
Gartner: Cybersecurity predictions for 2022-2023
Business2 months ago
Twitter shareholder lawsuit accuses Musk of ‘market manipulation’