Total Volume UP

Total actual TEUs: 3,952,357

TEUs forecast last quarter: 3,878,770

% change from preceding quarter: -4.0%

% change from same quarter last year: 10.0%

Near-term (to year-end) forecast volume UP

TEUs forecast next quarter: 4,309,247

Total TEUs forecast at year-end: 16,959,247

% growth forecast for current year: 6.1%

Previous % growth forecast for current year: 6.7%

• The import growth forecast for 2005 is cut to 6.1% from 6.7% because oil prices are staying higher for longer than previously thought, and the dollar has rebounded this year. The dollar is expected to resume its decline going forward. Growth will be slower but above trend at 3.5% or better in 2005 versus 4.2% in 2004.
  
  
• Import growth projected to slow to 6.1% from 12.9% in ’04 due to slower economy, a weaker dollar, and high oil prices.
  
  
• A key risk to the outlook is the huge trade gap, which could cause a dollar crisis if foreigners balk at funding the deficit.
  
  
• China has modestly revalued the yuan against the dollar. Watch whether the yuan is allowed to appreciate and whether other Asian countries let their currencies rise further.
  
  
• Direct foreign investment flows and the accompanying relocation of productive capacity around the globe continues to change where the U.S. sources its imports.
  
  
• The renewed upturn in the global factory sector should help boost U.S. imports.

Long-term (2006-2007) forecast volume UP

Total TEUs forecast for next year: 18,047,692

% growth forecast for next year: 6.4%

Previous % growth forecast for next year: 6.0%

Total TEUs forecast for year after next: 19,865,285

% growth forecast for year after next: 10.1%

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• Only a marginal change in the import-growth forecast for 2006, to 6.4% from 6.0%. Import growth also little changed from projected 6.1% in 2005. U.S. real GDP growth is likely to slow somewhat further but remain solid and around trend, at more than 3%.
  
  
• Consumer spending will slow as rates rise further. With signs of a housing bubble apparent in some regions of the country, especially on the coasts, housing could take a serious hit. Given the rapid rise in house prices and its positive impact on household wealth, that could severely hurt spending and even threaten a U.S. recession.
  
  
• A trade war, a dollar crisis, and higher oil prices remain concerns.

Total Volume UP

Total actual TEUs: 2,068,226

TEUs forecast last quarter: 2,084,926

% change from preceding quarter: 1.3%

% change from same quarter last year: 4.8%

• U.S. exports expanded 4.8% in Q1 as global growth remained solid at an estimated 3.5% (saar over Q4) and the previous fall in the dollar boosted competitiveness. Even so, export growth declined from 8.0% for 2004 as oil prices rose sharply, worldwide growth slowed from the fastest pace in some 20 years, and the dollar rebounded from its lows.
  
  
• The most important export market by trade route in Q1 was the Transpacific (56.1% of all U.S. exports) by region, NE Asia (42.9%), and by country, China (18.4%).
  
  
• The most important U.S. export in Q1 was paper & waste, contributing 15.1% of all exports, followed by cotton & fabrics (5.6%), animal feeds (3.8%), and wood pulp (3.5%).
  
  
• The top five U.S. ports shipped 49.6% of all U.S. exports in Q1: LA (11.9%), New York (11.1%), Long Beach (11.1%), Savannah (8.0%), and Charleston (7.6%).
  
  
• The top 5 liners carried 35.6% of all U.S. exports in Q1.

Near-term (to year-end) forecast volume UP

TEUs forecast next quarter: 2,163,897

Total TEUs forecast at year-end: 8,507,281

% growth forecast for current year: 8.6%

Previous % growth forecast for current year: 8.9%

• The export-growth forecast for 2005 has been marginally reduced to 8.6% from 8.9% last time. Even so, that would be a slight acceleration from 8.0% in 2004 as global growth remains firm, oil prices fall back, and U.S. producers benefit from past dollar depreciation, where such has occurred.
  
  
• Official data show that export volumes are up at a saar of 12.6% in Q2 compared with Q1.
  
  
• The renewed upturn in the global industrial cycle should help spur U.S. exports. The new-export-orders subindex of the ISM survey of manufacturing improved to 55.9 in July from 50.4 in June, while increasing to 53.5 from 50.0 in the accompanying survey of the non-manufacturing sector.
  
  
• Slower growth in U.S. domestic demand may turn U.S. producers’ attention and efforts to selling in foreign markets.
  
  
• A key risk is for a “hard landing” as China -- our largest and nearly fastest-growing market in Asia -- acts to slow and reorient growth. But, China grew 10.7% in Q1 over Q4, while Q2 looks strong.

Long-term (2006-2007) forecast volume UP

Total TEUs forecast for next year: 8,976,183

% growth forecast for next year: 5.5%

Previous % growth forecast for next year: 11.5%

Total TEUs forecast for year after next: 9,033,568

% growth forecast for year after next: 0.6%

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• Export-growth forecast revised notably downward for 2006, to 5.5% from 11.5% before. That reflects large dollar appreciation against currencies such as the euro and yen this year -- currencies of two of our major export markets -- that has sig-nificantly eroded prior competitiveness gains stemming from a weaker dollar. Also, despite the modest revaluation of the yuan (China is our top export market), questions persist as to how much further they will allow the currency to appreciate.
  
  
• Increased protectionism from the U.S. would likely be met by similar action abroad to the detriment of U.S. exports. Oil prices are also an important risk.
  
  
• Ban on U.S. meat exports continues to constrain a key export.