Consumption Forecast Mostly Steady as it Goes

Flexport’s Consumption Forecast (FCF) shows the outlook for real (i.e. inflation-adjusted) Personal Consumption Expenditures on a seasonally adjusted basis. The March FCF projects consumption to be up by a slight 0.2% over the actual January figures by the end of the current forecast period in May. By the same measure, in the three months between it will be relatively flat.

The Methodology: The Flexport Consumption Forecast that follows augments time series analysis with insights gleaned from Flexport data. There is generally a relationship between what ships in September and what people consume in November, for example. Our methodology takes advantage of that correlation to produce a more accurate forecast.

Update March 17, 2023: The elevated pressure on global supply chains has been the result of several factors in combination: strong incomes, a willingness to spend rather than save, and a heightened preference for goods in consumption. Flexport’s Consumption Forecast tracks personal consumption expenditures by category on a seasonally adjusted basis.

__Fig. 1 A Slight Dip Before a May Upswing __

Fig. 1 Shows the track of real US Personal Consumption Expenditures (PCE) through the onset of the pandemic. From that period through the end of 2021, there was a striking level of volatility in overall consumption behavior, which settled a bit as 2022 approached. Throughout 2022, the growth in PCE has been notably steadier.

According to the latest Flexport forecast, May 2023 total PCE will be up 4.0% from the rebased year (February 21 - January 22), which still constitutes growth.

Fig. 2 Nondurable Goods Bounce in April and May

In Figure 2, we adopt a new base-year method, showing the sub-categories relative to the average value for the year preceding the graph. This is meant to stabilize the graphs from month to month, avoiding dramatic base month effects. Other approaches are possible on our site.)

The figure shows that the overall consumption of nondurable goods – those intended to last for less than three years – will return to just below the levels of the rebased period by May, pulled up by a 1.8% rise in gas. Even though we see a small increase in Food over January by the end of May (0.2%), it continues to be an overall drag on the category, as it has over the past 12 months and beyond. Over the forecast period through May, overall nondurable goods consumption is forecast to rise 0.9%. Among the subcategories, after gas, clothing should see the fastest growth at 1.2%.

Fig. 3 Durable Goods Hold Steady

Figure 3 shows real durable goods consumption declining from January 2022 through May 2023 by 1.4%%. A drop in automotives and car parts are a major cause of this. New car sales are forecast to drop 3.5%, as are used vehicles; car parts fall by 1.3% by the end, driven mainly by the 4.9% month-on-month decrease in February. Recreational goods, such as sport vehicles and equipment, are expected to stage a recovery in May but only back to February levels.

More detail and customizable charts for the Flexport Consumption Forecast can be found at Flexport Research.

The next update for the Flexport FCF will be on April 18, 2023. The U.S. Bureau of Economic Analysis will release February data on March 31, 2023. Data for March will be released on April 28.

Please direct questions about the Flexport PCI to economics@flexport.com.

Disclaimer: The contents of this report are made available for informational purposes only and should not be relied upon for any legal, business, or financial decisions. Flexport does not guarantee, represent, or warrant any of the contents of this report because they are based on our current beliefs, expectations, and assumptions, about which there can be no assurance due to various anticipated and unanticipated events that may occur. This report has been prepared to the best of our knowledge and research; however, the information presented herein may not reflect the most current regulatory or industry developments. Neither Flexport nor its advisors or affiliates shall be liable for any losses that arise in any way due to the reliance on the contents contained in this report.

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