The outlook for US holiday season retail sales is either good or not so good, depending on whom you ask. Cargo container shipping has been slow in July and August, leading to speculation that the holiday season will not be all that retailers might hope for. The other side of the dispute notes that cargo shipping to US ports is increasing in September and is on track for more increases in October and November.

Retailers like Wal-Mart Stores Inc. (NYSE: WMT), Target Corp. (NYSE: TGT), and most others depend on shipments of goods from Asia to stock their shelves year-round, but especially at holiday time.

Container shippers Seaspan Corp. (NYSE: SSW) and Danaos Corp. (NYSE: DAC), and other privately held shippers such as AP Moeller-Maersk and China’s state-controlled COSCO, have been battling an over-supply of vessels which has driven down day rates and earnings for the world’s shippers. COSCO, for example, reported first-half earnings down -31.5% from a year ago and expects domestic demand for container shipments to be lower in the second half of the year.

There have also been reports that an alliance of Pacific Ocean shippers has substantially reduced its cargo capacity for manufactured Chinese goods as the country’s manufacturing engine has stalled. The Ports of Long Beach and Los Angeles receive about 40% of US container cargoes, and both have seen a drop in shipments. Long Beach cargoes fell -6.5% in August from the July level.

The National Retail Federation comes down on the side of a reasonably healthy 2011 holiday season. According the NRF’s latest report, July cargoes rose 6% over June’s but were still down -4% from July 2010.  The estimate for August cargoes is essentially flat with last year.

The NRF sees the 2011 numbers as a positive sign because last year’s cargo shipments were brought forward from September and October as US retailers feared a container shortage if they waited. The federation expects September shipments to be 11.8% higher than last September and October shipments to rise 9.5% year-over-year. Even November and December shipments are projected to rise.

Even the NRF is cautious though. The relatively strong August and September cargo numbers are not going to translate into big profits for either shippers or retailers: “The third quarter will be positive for the ocean carriers and retailers but that will turn into negative growth for the next two to three quarters thereafter.” The third quarter is back-to-school time for retailers and holiday shipping time for cargo carriers. What the NRF is saying is that the 2011 holiday season is going to be weak for retailers.

What at first looked like a disagreement over the coming holiday season, now really looks like an agreement arrived at in different ways. Looking only at signals from the shipping industry, reduced shipping volumes mean fewer goods on retailers’ shelves at holiday time. Looking only at shipping signals from the NRF, everything’s rosy. But if the NRF says that growth will be negative in the fourth quarter for both shippers and retailers, then that’s the same thing as saying the shippers’ signals are correct.

Given the weak US economy, the lack of consumer confidence, and now the weak outlook for goods coming in from Asia, any growth forecast for holiday sales must certainly be taken with a grain of salt.

Paul Ausick

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