Challenges in the US economy

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Throughout the spring and summer, the status the United States’ economy has been the subject of conflicting information. The hopefulness of early 2012 has given way to slight disappointments and uncertainties.

According to statistics released in the beginning of summer, economic growth in the US has been quieter than expected. Growth between January and March was expected to reach 2.2 per cent, but halted at 1.9 per cent.

The decline of unemployment appears to have stopped as well. In May, 8.2 per cent of working-age Americans – a relatively large number in the US – were without work. Economic growth in the US has remained at a reasonable level, especially compared to Europe; it has been kept up primarily by household consumption and car sales. Consumers are still careful, however, because they are burdened by worries over the value of their homes and lack of job security.

Businesses, meanwhile, are worried about economic hardships in the Eurozone and the slowing down of China’s industrial production. Both regions are important, in terms of exports, for American companies.

The state of the economy, particularly the gradual growth of public sector debt, is a hot talking point in American politics. An economic upswing would strengthen Barack Obama’s chances of getting another term. A slump, however, would offer new ammo for Mitt Romney, the Republican candidate.

A dynamic economy

It is possible for the economy to develop in either direction – after all, the US operates in an exceptional manner. Despite the rise of China, America's economy is the world’s largest, and its currency is the world's most central. In addition, the US is a genuinely dynamic and flexible economy. Because the country can react quickly to changes, economic recovery usually begins here.

The country’s strengths are the productivity of its businesses and a young population. It boasts a flexible job market as well: although it occasionally tosses people out, it also quickly pulls them back in as the business culture improves.

The dynamism of the US economy is aided by an atmosphere that fosters and appreciates entrepreneurship. This atmosphere enables the conception of companies such as Facebook and Google. In addition, the US is investing a significant amount of its productivity into product development and educational research.

Air cargo reflects economic changes

The main hubs for international air cargo in the US are New York, Chicago, Atlanta, Miami and Los Angeles – and, to a lesser degree, Houston and San Francisco.

According to Finnair Cargo’s area director of the Americas, Anthony LaRusso, the general economic landscape has a huge impact on air cargo.

Since air freight, due to its speed, is the most expensive mode of transport, business is affected when shippers and forwarders begin to discuss cost reduction. ”This has become a more acute issue under the current flat-to-depressed scenario. Opting for slower transportation by sea has been one way of cutting costs, even though that is not an option for products requiring fast transport. And since capacity continues to out-strip demand, market pricing remains compressed despite the fact that many carriers are paring down their fleets,” he says.

Companies in the manufacturing sector are the main clients for air cargo. Commodities range from auto and aircraft parts, machinery and heavy equipment to oil well supplies, welding equipment, medical equipment and printed matter.

”These are usually highly valued and time-sensitive commodities,” LaRusso adds.

JFK is Finnair´s gateway

Finnair operates from one gateway in the US, the John F. Kennedy International Airport.

”We pull cargo from different corners of the country, utilising interline partners and road feeder service providers. The main client group is the freight forwarding community,” LaRusso says.

Apart from its core market in Europe, Finnair Cargo has been able to take advantage of market growth in Asia by selling cargo services to Finnair´s destinations in China, India, Singapore and Thailand.

Text by Matti Remes
Photo by iStockphoto

Published June 14, 2012

Category: Market updates

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