U.S. container imports tumble as supply stress gives way to slack

By Lisa Bartlein

LOS ANGELES (Reuters) – After more than two years of rising demand, the volume of container imports coming through US ports has fallen sharply, raising questions about where a sector once seen as a stress point in the supply chain is bottoming out becomes.

Container import volumes in all US ports hit an all-time high in May and declined slightly before collapsing in August and September. That put the indicator close to levels last seen in 2019 before the pandemic and a spike in demand for supplies of furniture, clothing and appliances, according to data tracked by Descartes Datamyne.

Graphic: US container import volume boom comes to a halt – https://graphics.reuters.com/USA-IMPORTS/klpygeekdpg/chart.png

The question is whether the trendline – an indicator of the strength of consumption, the macro economy and trade – will flatten out in the coming months, relieving a source of the supply chain crisis that had pushed prices higher, or whether the boom will become one Total collapse comes with a possible looming recession, analysts told Reuters.

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Goods packaged in sea containers account for about 25% of US imports and much of the purchases made by consumers, whose spending drives up to 70% of US economic activity. Volumes rose by up to 40% from 2019 levels during the pandemic as retailers struggled to meet rising demand for goods.

This surprise surge clogged ports and caused cascading delays, resulting in late shipments of everything from pharmacy supplies to Peloton exercise bikes. As recently as March, the Biden administration’s supply chain task force had been tracking container imports as part of a “dashboard” to monitor distress in distributing goods and contributing to higher prices.

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“We’re going back to 2019,” said transportation economist Walter Kemmsies, who believes consumers are returning to their historical spending split of 70% on services and 30% on goods.

Services spending, which had risen during every US recession since 1973, broke this pattern when the US economy slipped into recession in early 2020 with the onset of the COVID-19 pandemic. The resulting drop in spending for this category — at one point as steep as 14% — freed up dollars for merchandise purchases.

Kemmsies said the declines in container imports in August and September came as retailers like Walmart and Amazon.com canceled billions of dollars in orders earlier this year. They made that call after shoppers stopped digging into sweatpants, couches, remote school laptops and big-screen TVs and shifted to spending on concert tickets, travel, restaurant dining and other services.

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US retailers are now awash in excess clothing, PCs, small appliances and holiday decorations and are scrambling to clear bulging product inventories. And they’ll likely hold back on new business until that profit-sapping backlog is eliminated.

S&P Global on Tuesday forecast that global trade would contract slightly in 2022 and 2023 before rebounding in 2024.

“The camps are full. Expect weak overseas orders until importers clear their inventory,” shipping consultant Jon Monroe said in a weekly update.

Bank of America analysts struck a similar note on Tuesday. “We are skeptical that there will be a major replenishment in the foreseeable future,” they said.

(Reporting by Lisa Baertlein in Los Angeles, editing by Kevin Krolicki and Marguerita Choy)

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