Consumer spending cuts have already led to a 20-30% decline in Chinese-made orders by U.S. importers, as CNBC recently reported, and more recent data from U.S. shippers shows that the slowing housing market is now manifesting itself in the Asian supply chain. data too.
“We are seeing the impact and the slowdown in appliances, home appliances (items like dishwashers) and DIY products,” said Akhil Nair, senior vice president of products for Asia-Pacific at Seko. Logistics. “We have seen a major slowdown in furniture and home decor, especially in China and Vietnam, as importers have large inventories.”
Inflation led to record levels of consumer confidence, but the housing market remained strong until the Fed’s more recent stance led to the biggest weekly hike in mortgage rates since the 1980s.
“We saw an immediate reduction in home building materials such as wood,” said Spencer Shute, senior supply chain consultant and sourcing company Proxima. “That shouldn’t come as a surprise given the numbers for new home sales and construction.”
Taken together, recent manufacturing orders data and housing-related orders data show how US consumer scrutiny of spending will continue to weigh on the supply chain situation and inventory planning.
General merchandise categories and orders have declined since March, by shipper, due to excess inventory. Major retailers including Walmart and Target surprised the market in May when they reported huge inventory levels.
Order declines are not widespread, according to the latest data.
“For other sectors like apparel, sporting goods and e-commerce, we’re still seeing strong demand,” Nair said. “Major apparel and footwear have not yet shown any major declines or postponements of orders to my knowledge,” he added.
The American Apparel & Footwear Association (AAFA) told CNBC it continues to see strong demand for apparel and footwear.
“Experiential shopping materializes in our industry in two ways,” said AAFA CEO Steve Lamar. “First, as consumers seek to gear up for experiences, they need the right clothes, shoes and gear. Second, the shopping itself – browsing stores and outlets for summer outfits , back-to-school kids’ clothes and shoes, or new back-to-work styles; touching materials; and trying on and shopping for your favorite clothes – remains an experience.”
Lamar added that the threat of persistently high prices remains a major concern for retailers.
US port congestion
Congestion at US and European ports and falling US manufacturing orders in China highlight this week’s CNBC supply chain heatmap.
The country’s ports continue to handle record imports and, as Shanghai slowly reopens, this peak season is expected to be strong despite inflation fears. The reason is that these orders were placed by US retailers months ago.
The increase in the number of non-scheduled and scheduled ships arriving at East Coast and Gulf ports is creating congestion in ship arrivals. So far, the unloading and loading of container ships in these ports is going smoothly.
West Coast ports, however, are still plagued by rail delays and chassis used as makeshift warehouses holding loaded containers.
The high volume of containers arriving at all US ports will continue as the peak season continues.
“We expect strong imports during the summer months as retailers finish bringing in back-to-school merchandise and start bringing in holiday merchandise,” said Jon Gold, VP, Channel. National Retail Federation sourcing and customs policy. “Retailers are heeding supply chain disruptions and planning accordingly to meet strong consumer demand, despite lingering inflation concerns.”
German trade union strike
Negotiations between the German trade union ver.di and the Central Association of German Port Companies (ZDS) are continuing after a second warning strike last week. This strike lasted 24 hours, while the first strike lasted one shift. The impact of the one-day strike affected almost all German North Sea ports.
Sources told CNBC that an offer had been made by ZDS to the union with a final offer for a pay rise of up to 11% in 18 months. Sources hope for a conciliation procedure in which politicians or a neutral person would intervene.
The delays created by the last warning strike added to the congestion of ships. Container ships are currently delayed for several weeks in some German ports.
The German labor war is impacting the availability of empty containers used for both European exports to the United States and Chinese exports. China is Europe’s largest trading partner.
“The overall situation in northern European ports is deteriorating,” warned Andreas Braun, director of ocean products for Europe, Middle East and Africa at Crane Worldwide Logistics. “Port congestion is on the rise as well as the occupation of construction sites,” he said.
Early shipping companies like MSC are reacting to the current scenario with emergency storage surcharges for imports and exports, with surcharges applied after exceeding the free standard storage time, and on top of the standard tariffs. Braun said this surcharge is currently limited to Dutch ports only and, to date, only MSC has circulated a communication regarding the additional charges, but he added, “we can assume that other ports and shipping companies will follow.” .
Shipping carriers are warning customers of the impact strikes and any related slowdowns may have on the supply chain. Hapag-Lloyd has issued a notice to report increased demand on trucks. Maersk said it would “absorb” the shutdown of its German terminals. “In order to minimize any further disruption to your supply chain, we will closely monitor developments up to and during the next round of meetings between the ver.di union and ZDS, recognizing that further strike action is possible,” Maersk informed its customers.