Slowing US Consumer Demand for Durables
With spot rates falling faster than what seasonality would suggest on most major trades, market participants are anxious to gauge whether this means a weaker peak season than the record-breaking peak seasons of the past two years. The global freight rate records have been driven by a shortage of vessel capacity, which also means that any resolution, prior to the delivery of new vessels in 2023, would have to come from easing of US import demand.
In issue 572 of the Sea-Intelligence Sunday Spotlight, we analysed the latest US Consumer Spending data published by the US Bureau of Economic Analysis (BEA). Figure 1 shows the Y/Y growth in consumer spending, whereas in figure 2, we show the same, but with an annualised Y/Y growth over 2019 instead. There are two main takeaways.
Firstly, we should note that while the Y/Y growth in 2021 was severely impacted by the exceptionally low 2020 base, it is also clear that there was very sound growth in Durable Goods in 2021, far exceeding any level we’ve seen before in the past 20 years. Secondly, a downwards trending but positive annualised growth rate, like the one for Durable Goods since April 2021 means that the underlying growth (or contraction) is getting progressively worse, as each additional year has to balance out an increasing number of higher growth years.
Taking both these figures together, we are left with the conclusion that compared to last year, Durable Goods spending has been contracting at a Y/Y rate of 6-10% in March to May, and with a longer-term annualised view, Durable Goods growth is slowly moving towards the pre-pandemic level.
This means that while we don’t get a definitive answer as to the strength of the peak season, we do see very clearly that the unprecedented strength of the Durable Goods consumption has slowed down in recent months. We are not seeing a boom or a crash in the market, but rather one that looks headed for a gradual return to the slower pre-pandemic levels.
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All quotes can be attributed to: Alan Murphy, CEO, Sea-Intelligence.
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