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What Tariffs? Retail Imports Forecast to Set Record, May Support Real Estate Growth Plans for Retailers

Projections Call for Sustained Growth With No Bets Beyond Start of 2019
July 10, 2018
Imports are filling cargo ships in ports around the country.

Retail imports are forecast to set a record this month and for the remainder of the year, the latest positive sign in the face of tariff concerns that may support any real estate growth plans for retailers.

Imports filled 1.82 million 20-foot cargo ships in May, leading the author of a new report to conclude that June will set a record for volume. That's a strong indication that retailers have a positive outlook on the economy.

The Global Port Tracker examined imports at 16 major retail container ports in the United States, including Los Angeles/Long Beach, New York/New Jersey and Miami.

June is considered an important month for retailers because it generally influences spending on commercial real estate or other expansion for the rest of the year. Along with reports of strong employment, consumer sentiment and wage growth, the import numbers are the latest positive signs pointing to a healthy economy, said Barry Wolfe, senior managing director of investment at Marcus & Millichap in Fort Lauderdale, Florida.

“There are a lot of positives. This is another one,” Wolfe said

The report, released by Hackett Associates in conjunction with the National Retail Federation, credited added consumer demand and a rise in retail sales for the increase, despite $34 billion of tariffs the U.S. imposed on China that took effect July 6. The comments and forecasts don't take into account discussion of potential further tariffs on goods from China valued at $200 billion that emerged late on July 10.

Those tariffs are expected to push prices higher but shouldn’t create a significant impact on trade, said Jonathan Gold, the National Retail Federation’s vice president for supply chain and customs policy.

"Retailers cannot easily or quickly change their global supply chains, so imports from China and elsewhere are expected to continue to grow for the foreseeable future," Gold said.

Even so, forecasters have been reluctant to give any clear indication of whether the solid economic conditions will last beyond the beginning of 2019. That's when any escalation in trade conflicts later this year and concerns about increases in interest rates would begin to take hold.

The May increase was up 11.3 percent from April as retailers prepare for the summer shopping season. It’s also 4.3 percent year-over-year growth. Imports in July and August should also set records, the report said.

The numbers support findings by the National Retail Federation that forecast strong sales for the remainder of the year. Retail sales -- excluding automobiles, restaurants and gas stations -- were up 5.6 percent year-over-year in May. Sales for the entire year could increase as much as 4.4 percent over 2017 with a strong holiday shopping season.

"This is certainly a lot different than discussions we were having a year ago about the retail industry," said Jack Kleinhenz, chief economist at the National Retail Federation. "I’m feeling very positive and optimistic about how we’re going to finish 2018."

Rob Smith, National Retail Reporter  CoStar Group   
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