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Consumer Goods Preferences: Elevated and Persistent
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 both durable and nondurable goods are remaining elevated above pre-Covid levels. Any previous trend toward pre-Covid norms has, at least for the moment, halted or reversed.
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 January 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 Levels Off
The latest data show that consumer preferences are maintaining the pattern we saw and forecast last month: holding steady at a level of goods preference below pandemic norms but well above pre-pandemic levels. The latest numbers forecast PCI levels in the mid-70s range through February 2023.
Fig. 2 Durables and Nondurables Flatten Out
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. That was true both in the overall level of durable goods consumption as well as in PCI forecasts for a stronger continuing preference for durables over services.
The latest forecasts still show a continued stronger preference for durables than for nondurables, relative to services, but the gap appears likely to close as the two series each stabilize. By February, the overall PCI is forecast to be at 75, with durables at 87 and nondurables at 53. The combined message is that the preference for goods endures.
The next update for the Flexport PCI will be on February 18, 2023. The U.S. Bureau of Economic Analysis will release December data on January 27, 2023. Data for January will be released on February 24, 2023.
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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