Consumer spending drives V-shaped recovery from pandemic recession, Drewry says
E-commerce shopping soars as buyers find more cash in their pockets after shutdowns cancel costs of commuting, vacations, and entertainment.
Buoyed by red-hot e-commerce shopping, the volume of shipping containers moving through world container ports during the second quarter registered a far smaller decrease than predicted, dropping about 8% compared to the same period last year as opposed to the expected pandemic slump of 16%, the logistics consultancy Drewry Shipping Consultants Ltd. said today.
The results “confounded” expectations for the second quarter, and most likely the third quarter as well, the U.K.-based firm said in its latest “Container Forecaster” report, published at the end of September. “Trade always seems to find a way, even in the most inhospitable conditions,” Drewry wrote in the report. “Not quite a full recovery then, but first half port throughput performance was sufficiently good enough for us to upgrade the annual global forecast for this year to minus 3.3%, up from minus 7.3% as given in June.”
According to Drewry, the force behind the surprisingly strong trade statistic was consumer spending, as shoppers stuck at home during coronavirus pandemic shutdowns suddenly found their pockets full of money, due to “involuntary savings” gained from restrictions in commuting, vacations, entertainment, and fuel costs.
“We, along with most analysts, seriously under-estimated the addiction of Western nations to consumption, particularly when shielded from some of the harsh reality by huge government safety nets,” the Drewry report said. “We assumed wrongly that populations, fearing long-term job security, would hunker down and limit non-essential purchases. It discounted the resourcefulness of human spirit when faced with adversity and, perhaps more tellingly, the untapped potential of e-commerce.”
The Drewry report was backed up by a similar finding from Cass Information Systems Inc., whose “Cass Transportation Index Report” for September found that freight continues a strong rebound as the pandemic continues, with shipping volumes improving 7% from August to September and registering only 1.8% below last year's levels. Furthermore, Cass said it expects more positive news in the coming months due to that positive trajectory, lean inventories that need replenishing, and growing consumer confidence.
A third report released today provided deeper detail on the e-commerce boom, as the National Retail Federation (NRF) said that a strong rebound in apparel purchases led a continuing “V-shaped recovery” from the pandemic recession as retail sales accelerated their rate of growth in September and marked the fourth straight month of year-over-year gains.
Similar to the other research, the NRF pointed to a rise in shoppers’ spending money driven by changes in work and recreation patterns. “Retail sales are continuing to build on the momentum we’ve seen through the summer and have been boosted by an improving labor market, a rebound in consumer confidence, and elevated savings,” NRF Chief Economist Jack Kleinhenz said in a release.
“A significant number of people remain unemployed, but more are going back to work and that makes them confident about spending,” Kleinhenz said. “September retail sales reflect the support of government measures and elevated savings that is being spent now that consumers are shopping again. With less spending on personal services such as travel and entertainment outside the home, some of that money is shifting to retail cash registers. All in all, these numbers and other economic data show the nation’s economy remains on its recovery path.”
By the numbers, U.S. Census Bureau statistics showed that overall retail sales in September were up 1.9% seasonally adjusted from August and up 5.4% year-over-year. That was more than triple the 0.6% month-over-month increase and almost double the 2.8% year-over-year increase in August. Likewise, NRF’s own calculation of retail sales – which excludes automobile dealers, gasoline stations, and restaurants in order to focus on core retail – showed September was up 1.3% seasonally adjusted from August and up 12% unadjusted year-over-year. The year-over-year gain was more than double the 5.7% year-over-year increase in August.
#Retail sales growth speeds up as September marks fourth month of gains. https://t.co/FEVJIBXBCd pic.twitter.com/SUMTeOXbVo
— National Retail Federation (@NRFnews) October 16, 2020
