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STRATEGY

Shipping Slump Triggers Fears of Slow Holiday Season

Retail container traffic is expected to drop this month, typically the busiest of the year.
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Anticipating a slow holiday shopping season, U.S. retailers are shipping fewer goods through the nation's ports and onto their store shelves, according to the National Retail Federation.

This month, retail container traffic is expected to drop by 3,300 Twenty-foot Equivalent Units, or TEUs, below a peak of 1.51 million last October, the trade group said. October is traditionally the busiest time of year for retail container traffic, as stores stock up for the holidays.

Based on earlier estimates, October was initially forecast as a record-breaking month. Port officials were expecting to handle some 1.52 million TEUs in August, while the actual volume was closer to 1.46 million -- a 1.4 percent decline from the same period last year. That's prompted the trade group to lower its forecasts for the months ahead.

"Retailers have a good sense of the economy and are planning their inventories carefully," Erik Autor, the group's international trade counsel, said in a statement.

Autor said the lower volume of goods moving through major ports in Los Angeles, Seattle, New York, and Savannah, among others, shows that store owners are worried about being left with unsold goods and forced markdowns.

Paul Bingham, an economist with Global Insight, a Boston-based research firm that prepares the group's monthly port survey, said retailers were reacting to growing uncertainties in the economy.

"A slower economy means fewer imports and that means fewer containers coming through the ports. The good news is that lower volume means the ports are free of congestion and that the goods coming through should move smoothly all the way from ship to shore to store," Bingham said.

The trade group is expecting a modest 4 percent increase in retail sales this holiday season, below the 10-year average of 4.8 percent. That would make it the slowest holiday sales growth in five years.

"With the weak housing market and current credit crunch, consumers will be forced to be more prudent with their holiday spending," Rosalind Wells, the group's chief economist, said in a statement.

Retailers expected to be hit hardest are those that target low and middle income earners, such as discount and department stores, the group said. 

Last updated: Oct 8, 2007




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