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As new Covid-19 outbreaks heap fresh disruption on strained supply chains, carriers and customers alike are trying to gauge how much longer consumer demand will drive up global shipment volumes.
Recent US retail numbers and statistics from the World Trade Organisation (WTO) suggest the momentum may be slowing, but analysis by Flexport points to a renewed rise in demand for consumer goods that will keep the system strained well into next year.
The WTO announced on 18 August that its goods trade barometer had hit its highest level since 2016 inMarch and, while the index is still above its longer-term average, growth is decelerating, which could mean the expansion of global trade is at or near its peak.
Key elements of the barometer – ocean and air cargo, raw materials and automotive products – remain at elevated growth, but the export orders index has slowed, which points to a slowdown in economic expansion, said the WTO.
Further indication that consumer appetite for goods may be slowing comes from the US National Retail Federation (NRF) and Department of Commerce. The latter registered $617.7bn in US retail sales in July, 15.8% higher than in July 2020, but down 1.1% on June.
The NRF, whose statistics do not include the revenue of automobile dealers, petrol stations and restaurants, also calculated a 1.1% month-on-month decline for July on a seasonally adjusted basis, although year on year, sales volumes were up 9.5%.
Still, the NRF refrained from declaring the beginning of a decline in retail sales.
“Despite this monthly dip, the economy has rebounded quite well and is more than just on the mend,” said chief economist Jack Kleinhenz.
“The consumer has continued to be resilient, and recent price increases brought on by constraints in the supply chain have not dampened the robust demand seen during the past year. If retailers could find more inventory, they could sell it.”
And Phil Levy, chief economist of Flexport, sees no any indication that sales of goods are in retreat. In response to frequent queries from customers on when elevated consumer spending on goods would return to pre-Covid levels, Flexport developed a post-Covid indicator (PCI), which aligns the balance of consumer spending on goods against services with shipping volumes. For four years prior to the pandemic, the share of goods averaged 31.2% of consumption, with little variation. From June through October of last year, it jumped to about 34%.
The PCI works with the correlation of consumer behaviour, using data from the US Bureau of Economic Analysis, and shipping data from two months prior (to account for the balance of time from shipping to purchase of goods). The index sets zero as the level of goods consumption pre-Covid and 100 at its level of last October.
For June, the PCI shows a reading of 130 and 147 in July, reflecting a rise in the share of goods in consumer purchases. For August and September Flexport’s shipping data point to readings of 145 and 155, respectively.
The firm said: “The goods mania is back, it never actually left but had subsided from a peak in March. The latest Flexport data show the preference for goods over services climbing back to peak spring 2021 level as we head into autumn. All this remains well above past norms, and above the elevated levels of summer 2020.”
These numbers indicate that the industry is not going to enjoy a breather to clear the decks before the peak season hits. The high volume in shipping orders, plus need for restocking depleted inventory levels, makes it highly likely that there will not be any serious drop-off in pressure on the system at least until the lunar new year break in February, Mr Levy warned.