Economic Data Tracker – 
Spring break hitting peak weeks; Baltimore accident stresses infrastructure and supply chains

Economic Data Tracker

March 29, 2024

Our weekly view on the economy including rationale on GDP, jobs report, and Fed policy decisions. Download the entire weekly edition to view timely charts and data providing a comprehensive picture of how incoming economic data affects our economic outlook.

Trend watch

Spring break is hitting peak weeks this week and next. Through March 28th, weekly air passenger counts jumped to 18.0 million, the highest since early August. For context, 18 million per week wasn’t reached until mid-summer in 2019.

However, several spring religious holidays – including Easter, Ramadan, and Holi – are likely weighing on some of the other activity-based indicators (slides 5 and 6). For instance, hotel occupancy, restaurant reservations, and rail traffic dipped in the past week.  

What’s new this week

  • Growth in 4Q23 revised upward as consumers stayed solid (slide 7).
  • New home sales down 3 of past 6 months, and prices fell for third a month (slide 8).
  • New durable goods orders up in February (slide 9).
  • Big 4 indicators point toward continued growth for U.S. economy (slide 10). Updated following the release of personal income and spending data for February.
  • The Fed’s favorite inflation gauge cooled, though housing isn’t cooperating (slide 11). 
  • Global shipping costs retreating, but still elevated due to canal issues (slide 12). 

Our take

Most of the incoming data continued to improve generally. The exception was new home sales, which ebbed slightly in February after two strong months.

However, inflation remains at center stage. The February reading for core personal consumption expenditures (PCE) – an alternative inflation measure and the Federal Reserve’s (Fed) favorite inflation gauge – cooled to 0.3% in February from 0.5%. The primary driver for PCE remains housing, which is running hotter than the pre-pandemic pace.

Yet, the Francis Scott Key Bridge accident in Baltimore has heighten inflation concerns. Aside from the tragic loss of life and massive traffic problems, the bridge’s collapse essentially cut off the Port of Baltimore.

Although it is the 14th largest port in the U.S., the Port of Baltimore handles specialized cargo that cannot easily be shifted elsewhere. It is the top U.S. port for roll-on/roll-off cargo. Accordingly, it is the top U.S. inbound port for autos and auto parts, handling nearly 850,000 cars valued at more than $22 billion last year, and one of the top ports for heavy farm and construction equipment.

It is also the top inbound port for asphalt, and is in the top four for fertilizers, such as urea ammonium nitrate. Other imports include coffee, furniture, newsprint, alcoholic beverages, meat and seafood, plastics, metals, and rubber.

Additionally, it is the second largest outbound port for coal shipments, with 28 million short tons (tonnes) in 2023, or nearly 30% of U.S. coal exports. Also, its passenger terminals are utilized by several cruise lines, which carried nearly 450,000 passengers in 2023.

In the near term, these goods will need to find an alternate port. Some, such as containers, can be easily shifted elsewhere; however, it is difficult to reroute certain bulk goods, such as coal and large roll-on/roll-off cargo. Or other ports don’t have enough excess capacity to handle all of Baltimore’s volume.

Furthermore, the shifting of cargo will undoubtedly put additional stress on infrastructure, such as other ports, rail, and surface roads, as well as supply chains.

Initial estimates from federal officials anticipate a cost of at least $2 billion for the cleanup and to replace the bridge. It is also expected to be among the largest ever in marine insurance payouts, perhaps upwards of $3 billion in claims for damage to the bridge, wrongful deaths claims, and business interruptions.

While it is still very preliminary, we don’t see a big impact on overall economic growth; specifically, to gross domestic product (GDP). That said, there will be noticeable impacts to certain industries, such as autos and exports such as coal, though mostly those will be delays rather than outright decreases in activity or demand. Indeed, there will also be massive regional impact for Baltimore and the East Coast, particularly for traffic delays on surface roads. Yet, diverted cargo to other ports will increase activity elsewhere.

Alas, in the short term, such delays may temporarily push up prices for certain goods. For instance, more than half of the U.S. cobalt imports enter through Baltimore, which is a key component for rechargeable batteries for smartphones, tablets, and vehicles, among many other industrial uses. There are major metal exchange warehouses for cobalt, nickel, tin, and copper in Baltimore, which can’t easily be moved elsewhere.

Optimistically, it is believed that the channel of the Patapsco River could reopen for ships in a matter of weeks, perhaps as soon as May, but the larger cleanup effort to remove all the debris will take many months.

Lastly, the accident does make the U.S. economy more vulnerable should other issues arise, whether from natural disasters or something more sinister.

Bottom line

The U.S. economy remains resilient and should sidestep a recession. After several months of crosscurrents, most economic data has steadily improved in recent weeks. However, the cumulative impact of higher rates will continue to weigh on economic growth. 

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