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Post-Covid-Indicator 9-22-21

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Consumer Preferences for Durables and Nondurables Diverge

Flexport’s Post-Covid Indicator measures the balance between U.S. consumers’ spending on goods versus services. Our latest update shows inflation-adjusted consumer preferences for nondurable goods (e.g. apparel, home/personal care products, and oil products) will fall close to pre-pandemic levels by October. Pandemic preferences for durables (e.g. furniture, consumer electricals and electronics) are proving much more persistent. They are actually forecast to strengthen through the fall. . As a result, overall preferences for goods are expected to remain at 2021 levels heading into Q4’22.

Covid-19 triggered a boom in demand for goods, 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 September 15, 2022: The elevated pressure on global supply chains is the result of two factors in combination: strong incomes and a preference for goods in consumption. Flexport’s Post-Covid Indicator tracks the latter.

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.

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The latest data show that the consumer preferences have remained robustly in favor of goods with a reading of 126 on average through 2022, including 124 in July.

Looking ahead, the indicator is forecast to dip to 114 in August before accelerating back up to 139 in October. That makes no allowance, however, for differences between goods categories or for the substantial impact of inflation. The latter is particularly relevant in the face of continued elevated levels of energy and food prices versus a year ago.

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The black line in Figure 2 shows the PCI from Figure 1 expressed in real, i.e. inflation adjusted, terms – see our PCI Primer for more details. On that basis, preferences for goods versus services continued to decline in 2022 and are expected to reach their lowest in August 2022 since April 2020.

During 2022 there’s been a marked difference in the progress of consumers’ preferences for durable goods (e.g. furniture, consumer electricals and electronics) and non-durables (e.g. apparel, home/personal care products, and oil products).

The green line shows that demand for nondurable goods relative to services has declined steadily and will be close to pre-pandemic levels by the start of Q4’22, reaching 28% in October 2022.

Somewhat surprisingly, preferences for durable goods, the blue line in Figure 2, are forecast to increase during the forecast period, reaching 128% by October. This is particularly unusual, given the presumption early in the pandemic that a surge in durables consumption would be followed by a compensatory fall-off later on. We have yet to see it.

The next update for the Flexport PCI will be on October 15. The U.S. Bureau of Economic Analysis will release August data on August 26 and August data on October 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.

Flexport Indicators

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Ocean Timeliness Indicator Weekly Learn More
Logistics Pressure Matrix Weekly Learn More
Trade Activity Forecast Monthly Learn More
Post-Covid Indicator Monthly Learn More
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