This is an excerpt from Monday’s (3/29) Point of Sale retail supply chain newsletter sponsored by ArcBest.
Yee-HAW, people. The third round of fiscal stimulus is causing an immediate and significant boost to the consumer economy. Due to the sharp contraction in spending this time last year from COVID-related lockdowns, the one-year change is distorted and not as insightful as two-year percentage changes. In the latest week of data ending March 27, total card spending (TCS) was up 20% over 2019.
Stimulus impact. In aggregate, TCS was up 20% over 2019, but the increase was driven by stimulus recipients. For households receiving stimulus, TCS was up a staggering 49% over 2019, vs ~10% up for non-stimulus recipients. Another remarkable stat from Bank of America: TCS for stimulus recipients is running up 40% over February vs. 10% above for all others.
What are we buying? Apparently, Americans are still not quite satisfied with their WFH battle stations. According to BofA, the strongest post-stimulus segment gains came in pandemic favorites furniture and online electronics, as well as clothing. The smallest relative improvement came in the two biggest COVID beneficiaries: home improvement and groceries.
What’s it all mean? While some service-based segments gained from stimulus disbursements, Americans continue to spend big money on goods that improve their homes and workspaces. There are a few factors keeping goods spending elevated: First, big-ticket services like concerts, sporting events and amusement parks remain unavailable to the vast majority of Americans. Second, remote work has been an overwhelming success for both employees and employers. According to a January survey by PwC, less than 1-in-5 executives say they want to return to the office as it was pre-pandemic. And employees want to return to the office more slowly than employers expect.
The reversion back to services will happen gradually in stages. I believe the first stage is well underway with the two biggest COVID segment beneficiaries (home improvement and groceries) seeing the smallest stimulus-induced demand change. At the same time Americans have pared back grocery spend, restaurant spending is ramping up as more regions ease social distancing restrictions. On a two-year comp, restaurant spending is now up low-single digits over 2019.
The average American consumer balance sheet is as strong now as it has been in decades. The savings rate in the U.S. is more than double the previous 10-year average and will jump even higher, back toward 20% when the post-stimulus round three March data comes in. And the Democrat-controlled government may have more spending ahead.
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For us supply chain nerds, these factors add up to equal one thing: more freight demand for carriers and more competition for capacity among importers. The FreightWaves Inbound Ocean TEU Volume Index to the U.S. is up 75% over 2019 currently and is poised to move higher in the coming weeks.
In fact, SONAR leverages real-time data from ocean carriers to project out one-week demand trendlines. The U.S. inbound index is projected to surge ~15% over the next seven days, but many expect extraordinary demand for several months to come.
“Regardless of whether it’s in-store or on retailers’ websites, the record holiday season and numbers for 2020 show consumers are buying again and have been for a while. This surge has been going on for months, and retailers are importing merchandise faster than ever,” Jonathan Gold, the National Retail Federation vice president for supply chain and customs policy, said in a blog post.
Together with Hackett Associates, the NRF publishes the monthly Global Port Tracker. In the February release, the NRF wrote it expects imports “to set new monthly records from now into the summer.”
Want to keep up with how retailers are handling port congestion? Follow Point of Sale, my twice-weekly retail supply chain newsletter: https://www.freightwaves.com/pos