Leading indicators: shipping

In finance, we are usually reporting what has already happened. The financial results are usually lagging indicators. But typically we want to be aware of leading indicators so that we can pounce on opportunities or head off disasters.

Which is why we want operational or economic data upstream of the reporting results.

Shipping information as an example of leading indicator

Currently, everybody is waiting for the tariffs to start impacting the consumers.

The news indicates the farmers may already be feeling it but I’m not sure the consumers are.

Last week the news has been reporting about what data on shipping containers are showing. Basically, the news has been reporting that at some point in May, there will be a 35% drop in containers sitting in US docks or maybe leaving China.

The logic is shipping would be impacted first, then the dock workers and truckers, then the warehouses, and then finally the retail stores where consumers will finally see either the sticker shock or the supply disruption. The disruption would flow out from China, not because they are doing the disruption, but the shipping starts from there.

I’m no expert at this so I was trying to find something that would tell me something or confirm the news. There must be a site somewhere that depicts that 35% drop but I didn’t find it, but one of the YouTube videos did briefly go over this data, so it’s out there.

The image above might not be a leading indicator, but you can at least see how the tariffs may be impacting shipping, especially as time moves along.

The 2025 line does show that capacity of containers were trending above levels in prior years. Maybe that was to stock up on goods in anticipation of a drop-off in supplies as the tariffs kick in.

Parsing out shipping information based upon location

This next graph parcels out the West Coast data from the East Coast and Gulf Coast. This might be a way of judging the China tariffs impact.

Here, you can see Long Beach and LA dropping. This is a different graphic from the previous one and probably would be the one I would look at. This graphic might get closer to being a leading indicator.

Long Beach and LA would signal traffic from China as it has been said that 40% of the traffic is from China (if I’m remembering correctly).

The sources of these graphics came from the Bureau of Transportation: https://www.bts.gov/freight-indicators

Marine traffic a leading indicator?

Here’s another interesting graphic that was displayed in videos. This graphic was actually showing the tankers, cargo ships, pleasure ships, etc. actually moving around the seas. I have enlarged the image so you can see more clearly.

The red arrows are the tankers, the green the cargo ships, and the purple pleasure ships. Tankers are generally for oil.

I’m surprised at the number of tankers.

With this graphic, I think you have to know the history of the shipping because the image above is a snapshot in time and tells me nothing. I might have to look at this weekly to see if I can discern any decline in cargo shipping.

The image was pulled from the Marine Traffic website: https://www.marinetraffic.com/en/ais/home/centerx:-138.3/centery:25.0/zoom:3

Some video sources to watch

There is a guy who actually tracks this stuff and has been doing analyses of the current situation. He is the one who has shown that sometime in May there will be a 35% drop in activity.

What is finance’s leading indicators?

For your company, you would have to figure out what are the drivers of your business and see if they provide leading indicators. You might have to dig into the economics of your client to pull out some indicators.

Here’s where AI can play a role. AI can sift through lots of data, BIG data, much better than mere humans. This might be an area to focus on to get ahead of the curve.

Meanwhile, we can track how the shipping foretells the impact of the tariffs in the coming weeks of May. We are living through history here. We get to revisit what happens when you apply tariffs, especially the kinds that are being deployed in this timeline.

May we survive this.