The Economy under COVID-19: Notes from my New Hiding Place - Within the Herd (June 5, 2020)

Since we’re all cautiously emerging from sanctuary, the former title of my articles, written while I was housebound – Notes from the Trenches, – no longer applies. Therefore, I’ve chosen a new heading, as you will observe above. It still captures a certain wariness on my part.

Seafaring Stats and Home Remodeling

• Much attention has been paid to coronavirus outbreaks on cruise-line and navy ships. But there’s a vast array of other marine vessels that usually crisscross the open seas. One measure used for comparing shipping volumes is ‘dead weight tonnage’. DWT has nothing to do with the heft of a ship. Rather, it’s the sum of the weights of cargo, fuel, fresh and ballast water, food and drink, crew and passengers. By DWT, passenger ships are less than 1% of the world’s fleet. ‘Bulk’ carriers are the biggest component, at more than 40%. Oil tankers account for nearly a third; container ships for 10% to 15%; and gas carriers for the remainder.

• In Q1 of this year, the Baltic Dry Index, which monitors oceangoing shipments of dry bulk goods (e.g., iron ore, coal, grain, bauxite and alumina, phosphate fertilizer and forest products) plunged by -43%. Due to fears of coronavirus spread, hundreds of thousands of seafaring workers are only gradually and reluctantly being allowed to disembark at ports. While excess capacity is plaguing most aspects of sea shipping, there has been one surprising development. With the price of oil so low, order placements for tankers have increased. They’re being earmarked to serve as offshore storage facilities.

• By the way, big cruise ships can now carry upwards of 9,000 people ‒ nearly 7,000 passengers and more than 2,000 crew. They’re not floating villages. They’re good-sized movable towns.

• According to The Joint Center for Housing Studies at Harvard University, spending on residential remodeling during a recession is likely to suffer a decline greater than for the overall economy, but of smaller magnitude than new construction. As background, expenditures on maintenance, repairs and improvements to owner-occupied dwellings in America has risen at an annual average rate +4.0% since 2009. In 2019, the dollar volume reached $330 billion. In a recession, discretionary projects (involving kitchen and bathroom upgrades) will be moved to the back burner in favor of more critical exterior replacement jobs (roofing, siding and windows) and systems upgrades (plumbing, electrical and HVAC). Of course, during this current downturn, and excepting DIY initiatives, there’s the crucial question of whether outside workers will feel comfortable, health-wise, coming to your home.

• I can be anxious and defensive with respect to our aging residence, with all its personality quirks. Summertime is when the oddest-shaped insects will suddenly appear indoors. The other day my wife cried out that there was a great big bug bunging up her computer. I raced over to her side and said, “I’m sure it’s not native to our house. It must be a mercenary. Offer it double what the other guys are paying, and it’ll switch sides in a heartbeat.”
    “Not that kind of bug, silly,” she replied, “a computer virus.”
    Well of course that’s what she meant. Boy did I feel foolish. If only she’d used the word ‘glitch’ instead. Yes, I jumped to the wrong conclusion, but I’m sure everyone will agree it was a perfectly understandable mistake.

Read the previous article here: The Economy under COVID-19: Notes from my New Hiding Place – Within the Herd (June 3, 2020).

Alex Carrick is Chief Economist for ConstructConnect. He has delivered presentations throughout North America on the U.S., Canadian and world construction outlooks. Mr. Carrick has been with the company since 1985. Links to his numerous articles are featured on Twitter @ConstructConnx, which has 50,000 followers.