Despite the rampant high inflation, Americans' spending on goods is still growing rapidly. How long can this last under the expectation of raising interest rates?
At least judging from the container data of the gateway port on the west coast of the United States, there is no sign that American consumer demand is about to slow down.
On the 17th, geneseroka, executive director of Los Angeles port, California, said that imported goods can become a leading indicator of economic health, and "there is no sign" that the United States is heading for recession.
"There is really no sign that consumer buying will slow down in the short term." "As we expected, all the signs from retailers indicate continued strong shipments," he explained
He further predicted that , the peak season of Los Angeles port will be earlier than normal, and may begin at the end of June or early July
to prepare for the surge in summer
U.S. consumer spending accounts for about 70% of China's gross domestic product (GDP), which has always been an important indicator of U.S. economic growth.
The recent U.S. earnings season and the consumption data released by the U.S. government show that the financial status and demand of U.S. households are still good, and it is still a large "buy buy buy" scene.
Data released by the U.S. Department of Commerce on the 17th showed that retail sales in the United States continued to grow steadily in April, reflecting a wide range of consumer spending growth. Specifically, retail sales in the United States increased for four consecutive months, and the overall retail sales in the United States increased by 0.9% month on month in April. Nine of the 13 retail categories increased last month.
However, the increase in retail sales may reflect strong consumer demand, but it may also be the result of rising consumer prices, and the actual expenditure data (after inflation adjustment) will be released next week.
In order to keep pace with inflation, American consumers began to use credit cards heavily. According to a report from the New York Fed, credit card lending in the United States hit a record in March. This data is consistent with industry data. Bank of America's credit card data show that with the elimination of epidemic restrictions and the recovery of travel, American consumption has increased vigorously. Bank of America CEO Brian Moynihan recently said that in March 2022, Bank of America's credit card consumption increased by 13% year-on-year in dollar terms, and the transaction volume increased by 7.4%.
It should be explained that although, as pointed out by many analyses, the wage increase in the United States did not exceed the inflation increase, it has reached the highest level since the outbreak of the epidemic in 2020: the average hourly wage in the United States increased by 5.6% year-on-year in March. At the same time, supported by the U.S. real estate market and U.S. stock market, U.S. households are in good financial condition, which is prominently reflected in the fact that the household debt service ratio is far lower than the historical average.
In this case, the latest port data provides new support for the consumption boom.
Ceroka said that the first quarter is by far the busiest quarter. "The arrival volume in may also looks strong."
He said that as retailers continue to replenish lean inventory, the (arrival volume) will continue to "look very stable" in the coming months, and the port of Los Angeles will continue to monitor future economic indicators. "At present, with the savings in U.S. consumer accounts reaching record levels, there is really no sign that consumer purchases will slow down in the short term."
in the nearby Long Beach port, Mario Cordero, its executive director, has the same view
"Freight continues to move at a record speed and may not slow down soon." When Cordero recently released the April data of Long Beach Island, he said that the second largest port in the United States announced the busiest April on record.
Specifically, in April, Long Beach port transported 82071820 foot TEUs, an increase of 10% over the previous record set in April 2021. Among them, imports increased by 9.2% to 400803teu and exports decreased by 1.8% to 121876teu Port mobile empty containers increased by 16.9% to 298039teu.
"goods continue to move at a record speed and may not slow down soon." "We are preparing for a possible summer surge," Cordero said
where will you spend your money next
Will consumer spending fall in the coming months with the end of the US government stimulus plan and the prospect of rising interest rates?
Long Beach port pointed out in the forecast that in the coming period of time, shippers will be busier than usual however, due to inflation, retail activity in the United States will stabilize and consumers will readjust their household budgets to spend more on entertainment, restaurants and other services that require face-to-face services
In other words, after inflation adjustment, on the one hand, the preference for non durable goods in US consumption will decline, on the other hand, consumption will shift to service expenditure.
Dhaval Joshi, chief strategist of bcare searchcounterpoint, an investment consulting firm, told China business news that the main reason for the rise in inflation was the booming demand for durable goods, which reached a huge demand 26% higher than the trend at the peak. When many services cannot be provided, huge fiscal stimulus measures have contributed to this, leading to the transfer of consumption from goods to services.
"Even if the volume of products is several percentage points higher than the trend, commodity manufacturers using the just in time supply chain are unable to produce, not to mention that the 26% surge in demand is a huge imbalance, which inevitably leads to a sharp rise in prices. In this regard, an important phenomenon of the supply chain problem is the unprecedented large-scale transfer of expenditure to commodities." Josh said that most of the excess inflation rate is caused by the large overdraft of such durable goods. If this distortion is eliminated, the inflation rate will be about 3%.
Jonathan LaBerge, vice president of Bank of America's Credit Department of bcare search, told the first financial reporter that according to the agency's calculation, compared with the trend before the epidemic, the current actual expenditure on goods in the United States is weakening, while the expenditure on services is strengthening.
"Commodity spending jumped sharply during the epidemic. At present, we are going through the transformation from commodity spending to service spending, some of which occur naturally, because you can't see that manufacturing or commodity consumption will always be so strong." "The impact of the volatility of commodity consumption on the economy is actually greater than that of service consumption. Although the amount of service consumption (in the United States) is greater. At present, the contribution of real service consumption to real GDP is the highest since the 1950s. Therefore, as commodity consumption continues to normalize, the recovery of service consumption can bring some ballast to the economy," he said
