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Post-Covid-Indicator 9-22-21

May 18, 2023

Post-Covid Indicators

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Consumer Goods Preferences: Durables Back Above Summer ‘20 Level

Flexport’s Post-Covid Indicator (PCI) measures the balance between U.S. consumers’ spending on goods versus services. Our latest update, which begins in April, forecasts the overall PCI to hold remarkably steady around 80: a slight dip to 79 in April then 81 for May and June. This is driven by a small increase in the durables reading, although it continues to remain relatively flat.

Covid-19 triggered a boom in goods demand, but how long will it last? We analyze exclusive shipping data to peek into the future. The monthly Flexport Post-Covid Indicator shows how demand could shift in the coming months.

The Methodology: The Flexport Post-Covid Indicator is based on an analysis of correlations between detailed shipping data and national consumption behavior. As one would expect, given how goods move, the closest correlations are between shipping flows in a month and consumption a bit later. Using the estimated model, we can look at more recent shipping data and forecast the consumption patterns that are likely to follow. See our report “Understanding the Post-Covid Indicator” for more details.

Update May 18, 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 Post-Covid Indicator tracks the last of these.

The PCI compares the balance of spending in summer 2020 (PCI = 100) to that before the pandemic (PCI = zero) and reached a peak of over 150 in April 2021.

Fig. 1 Goods Preference to Remain in the 80 Range

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The latest data show that consumer preferences for goods increased again in March. We forecast that from April to June they will level off, with the PCI for each of the three months hovering around 80. They remain below pandemic norms, but are still well above pre-pandemic levels.

Fig. 2 Durables Preference Back Above Summer ‘20 Levels

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Figure 2 breaks down goods preferences into the two major subcategories: durable goods, which are meant to last three years or more, and nondurable goods. One of the real puzzles of the pandemic-era economy has been the enduring strength of demand for durable goods. In previous months, that number looked to be on the path towards the pre-Covid benchmark.

The latest forecasts, however, show a reversal in the trend. By June, the overall PCI is forecast to be at 81 with durables at 104 and nondurables at 36. The combined message is that the preference for goods endures.

The next update for the Flexport PCI will be on June 21, 2023. The U.S. Bureau of Economic Analysis will release April data on May 26, 2023. Data for May will be released on June 30, 2023.

See our PCI Primer for more details. 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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