Consumption Forecast: Holiday Season Strength

*Flexport’s Consumption Forecast (FCF) shows the outlook for real (inflation-adjusted) Personal Consumption Expenditures on a seasonally adjusted basis. The September FCF, which spans September to December, projects consumption to increase 0.9% from September, with total PCE for 2023 forecast to be 2.3% above the full year 2022. Comparing calendar years, 2023 real goods spending rises 2.0% over 2022. The strength is in durables, up 4.3%, while the larger nondurables category should finish up only 0.7%. The holiday season looks reasonably strong, with seasonally-adjusted goods demand forecast to rise 2.1%, December over August. *

The Methodology: The Flexport Consumption Forecast that follows augments time series analysis with insights gleaned from Flexport data. There is generally a relationship between what ships in September and what people consume in November, for example. Our methodology takes advantage of that correlation to produce a more accurate forecast.

Update October 17, 2023: The elevated pressure on global supply chains has been the result of several factors in combination: strong incomes, a willingness to spend rather than save, and a heightened preference for goods in consumption. Flexport’s Consumption Forecast tracks personal consumption expenditures by category on a seasonally adjusted basis.

Note: Our forecast reflects the current Bureau of Economic Analysis estimates for PCE. They are often subject to revision.

Fig. 1 Spending to Finish the Year Strong

Fig. 1 shows the path of real U.S. Personal Consumption Expenditures (PCE) from the onset of the pandemic through to the end of the current forecast period in October. Up to the end of 2021, there was a striking level of volatility in overall consumption behavior, which settled a bit as 2022 approached. Throughout 2022 and the first half of 2023, growth in PCE was notably steadier..

Our latest Flexport forecast is for that trend to continue. Among the subcomponents of PCE, the strongest growth will come from durable goods, forecast to rise over 3% in the 4-month forecasting period (roughly 10% at an annual rate!). Nondurable spending and services are predicted to grow much more slowly, up 0.6% and 0.5% respectively from August through December (annualized rates of roughly 1.8% and 1.5%).

Fig. 2 Convergence Among Nondurables

For those goods that are supposed to last less than three years - nondurables - things look less exciting than for their durable counterparts. First, growth is notably slower. Second, where there has been substantial variation in growth rates across the subcategories, we now see consumption levels coming together. The gasoline category is forecast to actually decline over the forecast period, while the other subcategories generally range between 0.4% and 0.7% growth (less than 3% annualized). The only exception is the “other nondurables” category, which is forecast to increase by 1% through December.

Fig. 3 Durable Goods Continue to Show Strength

The surprising strength in durables spending is broad based; all subcategories of durables spending are predicted to have significant growth over the remainder of 2023. The highest growth is forecast in “home durables” and “autos” – both over 3% – but even the worst subcategory “other durables” is predicted to increase by almost 2% over the period.

Note that this forecast is based entirely on ongoing spending trends, not on any forecast about labor relations in the auto sector.

More detailed and customizable charts for the Flexport Consumption Forecast can be found at Flexport Research.

The next update for the Flexport FCF will be on November 17. The U.S. Bureau of Economic Analysis will release September data on October 27, 2023. Data for October will be released on November 30.

Please direct questions about the Flexport PCI to economics@flexport.com.

Disclaimer: The contents of this report are made available for informational purposes only and should not be relied upon for any legal, business, or financial decisions. Flexport does not guarantee, represent, or warrant any of the contents of this report because they are based on our current beliefs, expectations, and assumptions, about which there can be no assurance due to various anticipated and unanticipated events that may occur. This report has been prepared to the best of our knowledge and research; however, the information presented herein may not reflect the most current regulatory or industry developments. Neither Flexport nor its advisors or affiliates shall be liable for any losses that arise in any way due to the reliance on the contents contained in this report.

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