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

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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.

Economics

Will Elon Musk’s cash splash pay off in Wisconsin?

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TO GET A sense of what the Republican Party thinks of the electoral value of Elon Musk, listen to what Brad Schimel, a conservative candidate for the Supreme Court of Wisconsin, has to say about the billionaire. At an event on March 29th at an airsoft range (a more serious version of paintball) just outside Kenosha, five speakers, including Mr Schimel, spoke for over an hour about the importance of the election to the Republican cause. Mr Musk’s political action committees (PACs) have poured over $20m into the race, far more than any other donor’s. But over the course of the event, his name came up precisely zero times.

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German inflation, March 2025

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Customers shop for fresh fruits and vegetables in a supermarket in Munich, Germany, on March 8, 2025.

Michael Nguyen | Nurphoto | Getty Images

German inflation came in at a lower-than-expected 2.3% in March, preliminary data from the country’s statistics office Destatis showed Monday.

It compares to February’s 2.6% print, which was revised lower from a preliminary reading, and a poll of Reuters economists who had been expecting inflation to come in at 2.4% The print is harmonized across the euro area for comparability. 

On a monthly basis, harmonized inflation rose 0.4%. Core inflation, which excludes food and energy costs, came in at 2.5%, below February’s 2.7% reading.

Meanwhile services inflation, which had long been sticky, also eased to 3.4% in March, from 3.8% in the previous month.

The data comes at a critical time for the German economy as U.S. President Donald Trump’s tariffs loom and fiscal and economic policy shifts at home could be imminent.

Trade is a key pillar for the German economy, making it more vulnerable to the uncertainty and quickly changing developments currently dominating global trade policy. A slew of levies from the U.S. are set to come into force this week, including 25% tariffs on imported cars — a sector that is key to Germany’s economy. The country’s political leaders and car industry heavyweights have slammed Trump’s plans.

Meanwhile Germany’s political parties are working to establish a new coalition government following the results of the February 2025 federal election. Negotiations are underway between the Christian Democratic Union, alongside its sister party the Christian Social Union, and the Social Democratic Union.

While various points of contention appear to remain between the parties, their talks have already yielded some results. Earlier this month, Germany’s lawmakers voted in favor of a major fiscal package, which included amendments to long-standing debt rules to allow for higher defense spending and a 500-billion-euro ($541 billion) infrastructure fund.

This is a breaking news story, please check back for updates.

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Economics

First-quarter GDP growth will be just 0.3% as tariffs stoke stagflation conditions, says CNBC survey

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U.S. President Donald Trump speaks to members of the media aboard Air Force One before landing in West Palm Beach, Florida, U.S., March 28, 2025. 

Kevin Lamarque | Reuters

Policy uncertainty and new sweeping tariffs from the Trump administration are combining to create a stagflationary outlook for the U.S. economy in the latest CNBC Rapid Update.

The Rapid Update, averaging forecasts from 14 economists for GDP and inflation, sees first quarter growth registering an anemic 0.3% compared with the 2.3% reported in the fourth quarter of 2024. It would be the weakest growth since 2022 as the economy emerged from the pandemic.

Core PCE inflation, meanwhile, the Fed’s preferred inflation indicator, will remain stuck at around 2.9% for most of the year before resuming its decline in the fourth quarter.

Behind the dour GDP forecasts is new evidence that the decline in consumer and business sentiment is showing up in real economic activity. The Commerce Department on Friday reported that real, or inflation-adjusted consumer spending in February rose just 0.1%, after a decline of -0.6% in January. Action Economics dropped its outlook for spending growth to just 0.2% in this quarter from 4% in the fourth quarter.

“Signs of slowing in hard activity data are becoming more convincing, following an earlier worsening in sentiment,” wrote Barclays over the weekend.

Another factor: a surge of imports (which subtract from GDP) that appear to have poured into the U.S. ahead of tariffs.

The good news is the import effect should abate and only two of the 12 economists surveyed see negative growth in Q1. None forecast consecutive quarters of economic contraction. Oxford Economics, which has the lowest Q1 estimate at -1.6%, expects a continued drag from imports but sees second quarter GDP rebounding to 1.9%, because those imports will eventually end up boosting growth when they are counted in inventory or sales measures.

Recession risks rising

On average, most economists forecast a gradual rebound, with second quarter GDP averaging 1.4%, third quarter at 1.6% and the final quarter of the year rising to 2%.

The danger is an economy with anemic growth of just 0.3% could easily slip into negative territory. And, with new tariffs set to come this week, not everyone is so sure about a rebound.

“While our baseline doesn’t show a decline in real GDP, given the mounting global trade war and DOGE cuts to jobs and funding, there is a good chance GDP will decline in the first and even the second quarters of this year,” said Mark Zandi of Moody’s Analytics. “And a recession will be likely if the president doesn’t begin backtracking on the tariffs by the third quarter.”

Moody’s looks for anemic Q1 growth of just 0.4% that rebounds to 1.6% by year end, which is still modestly below trend.

Stubborn inflation will complicate the Fed’s ability to respond to flagging growth. Core PCE is expected at 2.8% this quarter, rising to 3% next quarter and staying roughly at that level until in drops to 2.6% a year from now.

While the market looks to be banking on rate cuts, the Fed could find them difficult to justify until inflation begins falling more convincingly at the end of the year.

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