Holiday Hype, Container Demand Declining and New Trade.
Your weekly All-Ways round-up of supply chain news.
Happy Holidays
Do you feel like the holiday season starts earlier and earlier every year? According to the metrics, you might be right!
“October retail sales data confirms that consumers continue to stretch their dollars on household priorities, including gifts for family and loved ones this holiday season,” NRF President and CEO Matthew Shay said. “With a strong labor market and excess savings, we are expecting a solid five-day holiday shopping weekend, and retailers are prepared to meet their customers with the right inventory, competitive prices, and great experiences. We are keeping a close eye on the railway labor negotiations and urge Congress to do everything in its power to avoid a labor strike this holiday season.”
“October’s performance is a strong foothold as we go into the holiday season,” NRF Chief Economist, Jack Kleinhenz said. “Spending has gradually slowed but remains solid. Consumers continue to show resiliency despite elevated inflation, rising borrowing costs, and widespread macroeconomic uncertainties. With employment and wages growing and shoppers accessing accumulated savings, we expect the trend to continue. Early holiday deals that enticed customers to appear to underly the October numbers and more promotions will be seen in November and December, which are historically the big holiday shopping months.”
Although September was flat month over month, retail sales were up 8.6% year over year.
‘Tis the merry season after all.
Dampening Demand
HMM is warning that uncertainties up ahead are going to dampen container demands. The South Korean container carrier is a major player in the trans-Pacific with 16 services to the US West and East coasts from Asia.
Some factors which are likely to contribute negatively to global container volume are -
➡️ Widespread inflation
➡️ Economic slowdown
➡️ Geopolitical tensions
➡️ Weakening purchasing power
➡️ Increased inventory at major retailers
The predicted doom comes as retailers have significantly reduced their projected imports for the next quarter while easing port congestion is freeing up container capacity.
Even with an ongoing profit decline, HMM revenue still jumped 27% in Q3 - beating analysts' predictions.
With Friends Like These...
As concerns rise surrounding China and Russia and in an attempt to reduce reliance on single sources, India could play a major role in the emerging U.S. strategy of “friendshoring.”
During a visit to the country this week, Treasury Secretary Janet Yellen stated that “The United States believes in economic integration” and will continue to vigorously promote it. However, “we must also account for the probability of disruptions to trade.” For example, “malicious actors can use their market positions to try to gain geopolitical leverage or disrupt trade for their own gain.”
The US is attempting to pursue strategies that move away from countries with geopolitical and security risks to its supply chain while avoiding manufacturers who violate human rights.
New supply chains are developing and existing ones are becoming more robust with the expansion of investments and operations in India. On the government side, the U.S. is “partnering with India to grow local industries and connect them to global supply chains.”
Friendshoring is not always a good thing -
➡️ It creates polarization
➡️ It’s harmful to poor countries
➡️ It drives prices up
➡️ It’s difficult to implement in practice
What are your thoughts on friendshoring?