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Post-Covid-Indicator 9-22-21

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Consumer Preferences for Nondurable Goods in Decline

Flexport’s Post-Covid Indicator measures the balance between U.S. consumers’ spending on goods versus services. Our latest update sees the potential for consumers’ preferences for goods to start to decline back to summer 2020 levels in the next three months. The main driver is a downturn in nondurables preferences adjusted for inflation, which may be near pre-pandemic levels by the end of Q2’22.

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 May 16, 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 140% in April 2021 before declining through the second half of 2021. Without any inflation adjustment, heading into mid-2022 there are signs of a decline, though only back to summer 2020 levels.

The latest data show that the consumer preferences were roughly unchanged in March versus February and January in nominal terms. It should be noted that the U.S. BEA significantly restated its figures in its latest release, requiring a restatement of the Post-Covid Indicator.

Looking ahead, the indicator is expected to decline to 121% by June 2022. That would imply that overall consumer preferences for goods over services will decline but still remain above summer 2020 and pre-pandemic levels.

That makes no allowance, however, for differences between goods categories or for the impact of inflation.

The swing in consumers’ preference for goods over services was more marked for durable goods (e.g. furniture, consumer electricals and electronics) than for non-durables (e.g. apparel and home/personal care products) during early 2021.

While the outlook for durable goods is more volatile than for nondurables, nominal preferences for each are nonetheless expected to remain above summer 2020 levels into Q3’22.

When adjusting for inflation (the dotted lines in Figure 2, above) the difference between durables and nondurables is stark. That reflects goods price inflation having outstripped that for services during the pandemic period and is discussed in more detail in our PCI Primer.

The dotted green line in Figure 2 shows that durable goods demand relative to services adjusted for inflation is close to summer 2020 levels.

The dotted red line, meanwhile, shows that demand for nondurable goods relative to services will be three-quarters (i.e. a reading of 26% in June 2022) of the way back from those summer 2020 levels to the pre-pandemic norm when adjusting for inflation. Preferences for durables in real terms are expected to remain close to current levels, in line with summer 2020 levels.

The next update for the Flexport PCI will be on June 15. The U.S. Bureau of Economic Analysis will release March data on April data on May 27 and May data on June 30.

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

Indicator Published Details
Air Timeliness Indicator Weekly Learn More
Ocean Timeliness Indicator Weekly Learn More
Logistics Pressure Matrix Weekly Learn More
Trade Activity Forecast Monthly Learn More
Post-Covid Indicator Monthly Learn More
Southeast Asia Sectoral Cost Indices Quarterly Learn More

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