Transshipment at European ports is negatively out of step

Two German research institutes produce monthly figures on container handling in ports. They are the Leibniz Institute for Economic Research (RWI) and the Institute for Maritime Transport and Logistics (ISL). They maintain data series for a multitude of ports worldwide. The latest data is for October. I've been following these figures for years, but I can't remember the last time I included them in this weekly commentary. However, I am now, due to the most recent, remarkable development in these data. There is a certain volatility in the figures. Therefore, we shouldn't jump to conclusions too quickly, but what has been unfolding in recent months looks ominous for Europe.

The commentary on the figures states: "German and European ports are still losing significant container freight volume. In October, container throughput fell by 5 index points – the third consecutive decline. After the revival of trade in Europe last year, Europe continues to decline and is becoming increasingly disconnected from global trade." And then: "There is little hope that Europe will be able to keep pace with global economic development in the short term."

The image below leaves little to be desired in terms of clarity. Northwest Europe includes the ports of Hamburg, Bremen/Bremerhaven, Rotterdam, Antwerp, Zeebrugge, and Le Havre.

RWI and ISL attribute the decoupling of Northwest Europe from the rest of the world starting in 2022 primarily to high energy prices in Europe and sanctions against Russia. The weak European economy also plays a role, as it leads to lower imports, according to RWI and ISL.

That doesn't prevent Dutch industrial entrepreneurs from being quite positive. The NEVI purchasing managers' index remained unchanged at 51,8 in November. While this figure is slightly lower than in September, it remains reasonable. A similar trend applies to the CBS confidence index. While it fell slightly in November, it remains well above the average of the past two years.

Perhaps a bright spot for Europe is that the volume of orders placed with German industrial companies rose by 1,5% in October compared to September, when a 2% month-on-month increase was already recorded. The two consecutive monthly increases followed four consecutive monthly declines.

Gap inflation between the Netherlands and the eurozone is getting smaller
Dutch inflation fell to 2,9% in November. That was 3,1% in October and 3,3% in September. In the eurozone as a whole, inflation rose by a tenth: 2,2% in November compared to 2,1% in October. This markedly narrowed the difference between our inflation rate and the eurozone's. In my "preview" on BNR, I had already said that a drop in Dutch inflation in November seemed highly unlikely to me. One reason for this was that the general price level had fallen by 0,6% in November 2024 compared to the previous month. The figures are not adjusted for seasonal influences, and in November the price level usually falls month-on-month, but compared to the past ten years, the price decline in November 2024 was already quite substantial. Anyway, I was wrong. In November, the price level fell by a whopping 0,8% month-on-month.

This "rapid estimate" from Statistics Netherlands (CBS) provides only limited detail. Encouragingly, prices in three of the four categories rose less rapidly in November than in October.

Energy prices (including motor fuels) were 0,9% higher than a year earlier, compared to 2,1% in October. This cannot have been due to gasoline prices, which actually rose slightly in November. What helps is that European gas prices have been gradually declining for months. Apparently, more and more LNG is becoming available for the European market. The price decline has accelerated in recent weeks. This offers hope for the near future.

The price increase for food (including tobacco and alcoholic beverages) fell noticeably sharply, from 3,8% in October to 3,1% in November. I'm curious to know the main causes of this, but we won't know until Statistics Netherlands (CBS) publishes the full details next Tuesday. The price increase for services also fell: from 4,5% in October to 4,3% in November. This decline is less pronounced than for energy and food, but services' weight in the inflation basket is much greater than that of energy and food. Industrial goods saw a slight acceleration in the rate of price increases: 0,5% in November compared to 0,4% in October.

Towards a rate cut in the US
In the US, all attention next week will be focused on the Fed and its interest rate decision. Judging by recent interviews and speeches, the members of the interest rate committee seem deeply divided. However, I can't imagine the Fed not lowering the rate. Admittedly, inflation is still above target, and there's uncertainty about the extent to which the tariffs will further push inflation higher. If that happens—so far, it's been relatively mild—then the question remains whether the inflation-raising effect of the tariffs will constitute a one-off shock or lead to a more persistent inflationary process. In short, there's plenty of uncertainty, but no alarming figures.

The labor market is different. Keep in mind that the Fed, in addition to achieving and maintaining price stability, also has the mission of maximizing employment. Due to the government shutdown, the flow of labor market information has been disrupted. At the time of writing, these figures are not yet available.

Payroll processor ADP publishes its own figures on how many jobs are created or lost in a month. These figures certainly don't correspond directly with the official job growth figures, but are nevertheless interesting. In the following chart, due to the volatile nature of the monthly figures, I've shown job growth over six-month periods. The message seems pretty clear to me: the labor market is weakening and job growth is stagnating.

This poses a dilemma for the Fed. The inflation outlook argues against a rate cut, while the labor market argues in favor of one. In his press conferences, Fed Chairman Powell has often explained that in such a situation, the focus is on which of the two areas is furthest from the target. It seems to me that it's the labor market. Therefore, I'm betting on another Fed rate cut next Wednesday.

Closing
I'm not entirely clear about what's happening with Europe's international trade flows, but container throughput in ports in Northwest Europe has fallen sharply in recent months. Moreover, Europe seems to be out of step with the rest of the world and is falling further and further behind.

Dutch inflation continues to fall, and the gap with the eurozone is narrowing. The decline in Dutch inflation in November was broad-based. This may offer some hope.

US job growth is completely stagnant. Although inflation is above the Fed's target and there is uncertainty about how inflation will continue, in my view, the Fed cannot ignore the stagnant job growth. A further cut in official US interest rates next Wednesday therefore seems highly likely.

Hans de Jong

Han de Jong is a former chief economist at ABN Amro and now a resident economist at BNR Nieuwsradio, among others. His comments can also be found on Crystalcleareconomics.nl

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