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Economics

No sign of U.S. recession in freight demand, Maersk CEO says

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5 months ago

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Maersk CEO: We expect Red Sea disruption until at least the end of the year

Shipping giant Maersk, considered a barometer for global trade, is not seeing signs of a U.S. recession as freight demand remains robust, the company’s chief executive said Wednesday.

“We’ve seen in the last couple of years, actually, [the shipping container] market remaining surprisingly resilient to all the fear of recessions that there has been,” Vincent Clerc told CNBC’s “Squawk Box Europe” Wednesday, adding that container demand was generally a good indicator of underlying macroeconomic strength.

U.S. inventories — goods being stored before delivery or processing — “are higher than they were at the beginning of the year, but they are not at a level that is worrisome or that seems to indicate a significant slowdown right in the offing,” Clerc said, despite noting some unpredictability in numbers for companies replenishing stocks.

“We look also at purchase orders from a lot of retailers and consumer brands that need to import into the U.S. for the coming month of demand, and it seems still to be pretty robust … at least the data and the indicators that we’re having seem to point toward still some good level of confidence that the current consumption levels in the U.S. will continue.”

The last week has seen a sudden escalation in worries about a recession in the world’s biggest economy, the U.S., following a set of weaker-than-expected jobs data which has divided economists and market participants.

U.S. retail trade inventories — a measure of unwanted build — in May were up 5.33% from a year ago at $793.86 billion, according to the most recent release from the U.S. Census Bureau.

A report released by leasing platform Container xChange on Wednesday said indicators suggest inventories are higher than demand, meaning a less “prosperous time” in the coming months for container traders, the logistics market and retailers who stockpiled.

Maersk’s Clerc said the company had been surprised by the resilience of container volumes across the last few years, and said it expected that to continue in the coming quarters — with no indication the global economy is heading toward recessionary territory.

Chinese exports have been the engine behind strong container volumes as the global share of containers originating in or heading for China has increased, he continued.

In 2022, the Danish firm had a markedly more gloomy outlook, warning of a drag on demand from inflation, the threat of a global recession, the European energy crisis and the war in Ukraine.

A combination of those factors drove down freight rates in 2023, sending Maersk’s profits tumbling.

That trend was partially reversed this year amid soaring geopolitical tensions in the Red Sea, which led shipping firms to divert trade routes around the southern coast of Africa — extending journey times and taking capacity out of the global system.

How Red Sea attacks impact global supply chain

Red Sea to cause further inflation

Clerc told CNBC Wednesday he expected Red Sea diversions to continue at least until the end of the year.

“That, of course, requires more capacity, more ships in order to move global trade around the world, and that has created some shortages here in the second quarter and in the third quarter that we’re dealing with at the moment,” he said.

“That means, in the short term, higher cost, and we have had to take on significant cost as a result of this, both in terms of having needing more ships and needing also more containers to do the job that is expected of us.”

If the situation persists, Maersk will see “significant inflation” in its cost base which it will need to pass on to customers, he continued, with Asia to Europe or U.S. east coast routes costing between 20% and 30% more.

The impact of capacity constraints in the short term has been positive for the Danish shipping giant’s margins and led to three profit upgrades in recent months, Clerc added.

Maersk on Wednesday reported a decline in year-on-year underlying profit to $623 million from $1.346 billion in the second quarter, and a dip in revenue to $12.77 billion from $12.99 billion.

While weaker on an annual basis, the company said ocean freight margins were “significantly better” than in the first quarter of 2024 and fourth quarter of 2023, with an earnings before interest and taxes margin of 5.6% versus -2% and -12.8% in those prior periods.

Maersk shares were 1.6% lower at 12:45 p.m. in London on Wednesday.

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Accounting

Business Transaction Recording For Financial Success

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4 hours ago

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January 18, 2025

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Business Transaction Recording For Financial Success

In the world of financial management, accurate transaction recording is much more than a routine task—it is the foundation of fiscal integrity, operational transparency, and informed decision-making. By maintaining meticulous records, businesses ensure their financial ecosystem remains robust and reliable. This article explores the essential practices for precise transaction recording and its critical role in driving business success.

The Importance of Detailed Transaction Recording
At the heart of accurate financial management is detailed transaction recording. Each transaction must include not only the monetary amount but also its nature, the parties involved, and the exact date and time. This level of detail creates a comprehensive audit trail that supports financial analysis, regulatory compliance, and future decision-making. Proper documentation also ensures that stakeholders have a clear and trustworthy view of an organization’s financial health.

Establishing a Robust Chart of Accounts
A well-organized chart of accounts is fundamental to accurate transaction recording. This structured framework categorizes financial activities into meaningful groups, enabling businesses to track income, expenses, assets, and liabilities consistently. Regularly reviewing and updating the chart of accounts ensures it stays relevant as the business evolves, allowing for meaningful comparisons and trend analysis over time.

Leveraging Modern Accounting Software
Advanced accounting software has revolutionized how businesses handle transaction recording. These tools automate repetitive tasks like data entry, synchronize transactions in real-time with bank feeds, and perform validation checks to minimize errors. Features such as cloud integration and customizable reports make these platforms invaluable for maintaining accurate, accessible, and up-to-date financial records.

The Power of Double-Entry Bookkeeping
Double-entry bookkeeping remains a cornerstone of precise transaction management. By ensuring every transaction affects at least two accounts, this system inherently checks for errors and maintains balance within the financial records. For example, recording both a debit and a credit ensures that discrepancies are caught early, providing a reliable framework for accurate reporting.

The Role of Timely Documentation
Prompt transaction recording is another critical factor in financial accuracy. Delays in documentation can lead to missing or incorrect entries, which may skew financial reports and complicate decision-making. A culture that prioritizes timely and accurate record-keeping ensures that a company always has real-time insights into its financial position, helping it adapt to changing conditions quickly.

Regular Reconciliation for Financial Integrity
Periodic reconciliations act as a vital checkpoint in transaction recording. Whether conducted daily, weekly, or monthly, these reviews compare recorded transactions with external records, such as bank statements, to identify discrepancies. Early detection of errors ensures that records remain accurate and that the company’s financial statements are trustworthy.

Conclusion
Mastering the art of accurate transaction recording is far more than a compliance requirement—it is a strategic necessity. By implementing detailed recording practices, leveraging advanced technology, and adhering to time-tested principles like double-entry bookkeeping, businesses can ensure financial transparency and operational efficiency. For finance professionals and business leaders, precise transaction recording is the bedrock of informed decision-making, stakeholder confidence, and long-term success.

With these strategies, businesses can build a reliable financial foundation that supports growth, resilience, and the ability to navigate an ever-changing economic landscape.

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Economics

A protest against America’s TikTok ban is mired in contradiction

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10 hours ago

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January 17, 2025

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AS A SHUTDOWN looms, TikTok in America has the air of the last day of school. The Brits are saying goodbye to the Americans. Australians are waiting in the wings to replace banished American influencers. And American users are bidding farewell to their fictional Chinese spies—a joke referencing the American government’s accusation that China is using the app (which is owned by ByteDance, a Chinese tech giant) to surveil American citizens.

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Economics

Home insurance costs soar as climate events surge, Treasury Dept. says

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1 day ago

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January 16, 2025

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Firefighters battle flames during the Eaton Fire in Pasadena, California, U.S., Jan. 7, 2025.

Mario Anzuoni | Reuters

Climate-related natural disasters are driving up insurance costs for homeowners in the most-affected regions, according to a Treasury Department report released Thursday.

In a voluminous study covering 2018-22 and including some data beyond that, the department found that there were 84 disasters costing $1 billion or more, excluding floods, and that they caused a combined $609 billion in damages. Floods are not covered under homeowner policies.

During the period, costs for policies across all categories rose 8.7% faster than the rate of inflation. However, the burden went largely to those living in areas most hit by climate-related events.

For consumers living in the 20% of zip codes with the highest expected annual losses, premiums averaged $2,321, or 82% more than those living in the 20% of lowest-risk zip codes.

“Homeowners insurance is becoming more costly and less accessible for consumers as the costs of climate-related events pose growing challenges to both homeowners and insurers alike,” said Nellie Liang, undersecretary of the Treasury for domestic finance.

The report comes as rescue workers continue to battle raging wildfires in the Los Angeles area. At least 25 people have been killed and 180,000 homeowners have been displaced.

Treasury Secretary Janet Yellen said the costs from the fires are still unknown, but noted that the report reflected an ongoing serious problem. During the period studied, there was nearly double the annual total of disasters declared for climate-related events as in the period of 1960-2010 combined.

“Moreover, this [wildfire disaster] does not stand alone as evidence of this impact, with other climate-related events leading to challenges for Americans in finding affordable insurance coverage – from severe storms in the Great Plans to hurricanes in the Southeast,” Yellen said in a statement. “This report identifies alarming trends of rising costs of insurance, all of which threaten the long-term prosperity of American families.”

Both homeowners and insurers in the most-affected areas were paying in other ways as well.

Nonrenewal rates in the highest-risk areas were about 80% higher than those in less-risky areas, while insurers paid average claims of $24,000 in higher-risk areas compared to $19,000 in lowest-risk regions.

In the Southeast, which includes states such as Florida and Louisiana that frequently are slammed by hurricanes, the claim frequency was 20% higher than the national average.

In the Southwest, which includes California, wildfires tore through 3.3 million acres during the time period, with five events causing more than $100 million in damages. The average loss claim was nearly $27,000, or nearly 50% higher than the national average. Nonrenewal rates for insurance were 23.5% higher than the national average.

The Treasury Department released its findings with just three days left in the current administration. Treasury officials said they hope the administration under President-elect Donald Trump uses the report as a springboard for action.

“We certainly are hopeful that our successors stay focused on this issue and continue to produce important research on this issue and think about important and creative ways to address it,” an official said.

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