Changes in spending habits can help alleviate supply chain problems and inflation. In an article published by the American newspaper The Washington Post, writer David Lynch said that consumers have returned to their previous habits by returning the balance between spending on goods and services to what it was in May 2020.
According to inflation-adjusted data from transport company Flexport, freight consumption has increased by about 5% since before the pandemic.
According to the writer, after restaurants survived the worst of the pandemic (Coronavirus), they began to recover as consumers tired of buying goods began to spend on services, such as. to eat out. The Covid-19 crisis has led to the closure of cinemas and restaurants and a drop in travel fares.
And quotes Kathy Bostancik, chief US economist at Oxford Economics, “We are only in the early stages of shifting consumer spending from goods to services. Over time, the hospitality, travel, aviation and hospitality sectors will strengthen as consumers “Looking forward to spending on services, especially with the arrival of spring and summer.”
Transition to services
The writer believes that the shift to services, which reflects hungry consumers to resume their previous lifestyle, is good news in all respects and not just for business owners, as it can ease the pressure on stressed chains of supply and assist the Federal Reserve in its cold inflation campaign.
He points out that the change in the economy seems clear, as retail sales rose in April by 8% from a year ago, according to a preliminary estimate by the US Department of Commerce, which did not take into account inflation, but spending in restaurants. jumped by about 20%.
In March, spending on inflation-adjusted services reached a record $ 8.6 trillion, surpassing the previous figure recorded in February 2020.
According to the writer, the hospitality company “Marriott” says that the global demand for rooms from leisure travelers in the first quarter was 10% higher than bookings in 2019, and according to “South” Airlines, its quarterly operating income at the end of next year. June will be higher than pre-pandemic levels.
But Target, one of the country’s biggest retailers, has surprised in recent weeks by changing consumer preferences, leaving it with a barrage of products like accessories and TVs, which it has had to release.
changing consumer behavior
The boom in goods and the decline in services have overturned the usual pattern of consumer behavior during a recession. Bad weather usually makes people delay non-essential purchases, but with millions of Americans working from home, online demand has grown as cleaners and hotel workers struggle.
The author points out that the numerous rounds of federal stimulus, along with the central bank’s simple monetary policies, have helped support consumption as the economy recovers. Over the past year, with the unemployment rate steadily declining, multiple jobs have led to continued spending on goods.
He explained that many of what the Americans bought came from factories abroad, particularly in China, causing global supply chains to stall.
By last spring, the clash between rising demand and shrinking supply had pushed up prices and according to Federal Reserve Chairman Jerome Powell, for most days in 2021, supply crises would be temporary and prices would fall, but this did not happen.
The writer pointed out that the new consumer mood could start to affect supply chains, as demand for trucks has fallen by about a third since the beginning of March, although it continues to grow, according to the market demand index of the company “Trustop “. While the number of imported shipping containers arriving at the Port of Los Angeles has been lower than last year figure for 7 consecutive weeks.
Given the time lag between the time US companies deliver import orders and the goods arrive in Southern California, it is not clear that these changes reflect changing consumer tastes, according to Jane Siroca, the port’s chief executive, who said the goods arrived in los angeles days were ordered 3 to 4 months ago.
But the writer considers that this kind of shift in consumption from goods to services may contribute to mitigating inflationary disruptions in the supply chain, which Powell says was larger and longer-term than expected, and other factors may limit supplies and raise prices out of control. of the central bank Such as the aftermath of the war in Ukraine and the harsh closures in China to stop the spread of the Corona virus.
Relocation could lead to increased spending on services to reshape labor demand to gain employment in consumer-facing industries, such as hotels and restaurants.
The author concludes his report by predicting that the Federal Reserve will continue to raise interest rates by half a point in each of its next two meetings, in a bid to slow consumer price growth.