The Supply Chain Daily provides a curated overview of Panjiva's research and insights covering global trade policy, the logistics sector and industrial supply chains and draws from global shipping and freight data.
Lululemon's flexibility reduces damage from tariffs
Sports apparel retailer Lululemon Athletica Inc. faces a drag to earnings as a result of new U.S. tariffs on Chinese exports that took effect from Sept. 1. Yet CFO Patrick Guido has stated that the firm's "direct exposure to China is relatively small, with approximately 6% of our finished goods in scope for U.S. tariffs. That percentage is down considerably, given how we have diversified our vendor base."
Panjiva's data shows seaborne imports associated with Lululemon slipped 3.2% year over year in August after a 15.1% surge in the three months to July 31. The slowdown was driven by a 69.1% slump in shipments from China as the firm likely reduced its exposure.
Over the longer term, China's share of shipments associated with Lululemon have fallen to 12.7% of the total in the 12 months to Aug. 31 from 21.4% in calendar 2016. Vietnam remains its most significant supply center with 23.9% of the total.
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Daimler, Volvo tap the brakes as US auto sales surge in August
U.S. auto sales jumped 10.5% year over year in August after a slide of 0.2% in the prior three months verses the same period a year earlier. The recovery is likely associated with the timing of the Labor Day weekend. Sales of imported vehicles increased 8.5% in August after a 5.0% slide in the prior three months and may soak up import growth that reached in July of 6.3.%, according to Panjiva data.
Overseas vehicle manufacturers face difficult choices in the coming months due to the ongoing section 232 review of the industry by the Trump administration, which is due to reach a conclusion in November. Imports from Europe, which may be most exposed to the tariff risk due to a lack of negotiations or a recent trade deal, only increased 1.2% in July after a 15.5% drop in the second quarter.
The downturn in shipments from Europe has been led by a slide in imports associated with Daimler AG and Volvo Volvo Car Corp. Imports associated with Bayerische Motoren Werke AG and Jaguar Land Rover Ltd., meanwhile, likely rose by 6.4% and 2.1% respectively, according to Panjiva.
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US gas sales may need political support to reach India
U.S. exports of liquefied natural gas are set to grow further after the first exports from the Freeport Terminal, Texas, were completed in early September. Total U.S. LNG exports climbed 63.0% year over year in July after a 60.4% rise in the second quarter. That has come despite the lack of shipments to China due to the trade war, with the largest customer country being the EU with 26.9% of shipments in the 12 months to July 31.
U.S. exporters will face rising competition for new customers with geopolitics being a complicating factor. While a forthcoming U.S.-India trade deal may boost supplies — the U.S. represented just 4.2% of Indian LNG imports in the past 12 months to May 31 — the Indian government has recently also signed contracts with Russia.
Indian LNG demand is surging with a 95.0% increase in the 12 months to May 31 compared to the year-earlier period. The largest supplier nation has been Qatar with 51.0% of the total, while the largest importer was Petronet LNG Ltd. followed by Reliance Industries Ltd. and GAIL (India) Ltd.
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China's August export slip shows no one is really winning the trade war
China's international trade activity fell 6.2% year over year in August, including a worse-than-expected drop in exports of 1.0%, data from China's General Administration of Customs shows. The deterioration in exports from 3.3% growth in July may reflect lower stockpiling of products about to face new tariffs. Overall Chinese exports to the U.S. fell by 16.0% in August while imports from the U.S. slumped 22.4%.
While that may suggest that China is "winning" the trade war, the dollar value of China's net exports fell $4.1 billion, making a continuation of tariffs by the Trump administration more likely despite forthcoming trade negotiations.
At the sector level, Chinese exports of most consumer goods globally declined, including apparel which fell 6.4% year over year. The outlier remained semiconductors with shipments surging 33.7% in August after a 19.0% improvement in the prior three months.
Migration risks remain for Mexican truck exports
The U.S. State Department is overdue in delivering a report to President Trump as to whether the Mexican government has made sufficient efforts to tackle northbound migration. Should State determine that the Mexican government has not done so there is the risk of the phased imposition of tariffs on Mexican exports. Should action be taken, the trucking industry, which accounted for 65.0% of bilateral commerce in the 12 months to July 31, could face significant disruptions.
So far truck-borne freight has not suffered a downturn. Indeed, Mexican exports to states north of Texas, where alternative transportation modes could take over if trucking becomes inefficient, has grown by 8.3% year over year in July after a 0.9% drop in the second quarter.
The capital goods sector is one of the largest for shipping to northerly states with the largest consignees including Johnson Controls International PLC, shipments associated with which climbed 21.9% year over year in July, and PACCAR Inc's Kenworth Truck that posted growth of 21.3%.
(Panjiva Research - Logistics)
Logistics employment growth slows to weakest in more than 5 years
U.S. nonfarm payrolls grew 1.4% year over year in August, with the logistics and transportation sector seeing growth of 2.2%, according to the U.S. Bureau of Statistics. The latter was the slowest since February 2014 and was down to an accelerating downturn in rail employment and lower growth in both trucking and warehousing jobs.
The seaborne sector recorded growth of just 0.3% after four months of declining employment. A further recovery may be unlikely in the near term given U.S. seaborne imports may have fallen 0.6% year over year in August, Panjiva data shows, and given global trade and business conditions sentiment is worsening.
(Panjiva Research - Logistics)
Christopher Rogers is a senior researcher at Panjiva, which is a business line of S&P Global Market Intelligence, a division of S&P Global Inc. This content does not constitute investment advice, and the views and opinions expressed in this piece are those of the author and do not necessarily represent the views of S&P Global Market Intelligence.
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