Introducing the Flexport Consumption Forecast

What will the holiday season look like? That’s a regular question for anyone who’s involved in the production, transport, or retail business, given the importance of the fourth quarter to annual sales.

Flexport Research has been tracking and forecasting this extraordinary time through releases such as the Post-Covid Indicators. These indicators have tracked the remarkable swing in personal consumption away from services and toward goods. They also currently show durables consumption remaining strong relative to services, while nondurables consumption is moving quickly back to a pre-Covid ratio with services.

But what if you don’t want to worry about ratios? What if you want a forecast of what will happen next with the level of durables consumption? The level of nondurables? Or even subcategories like seasonal goods, or apparel? For that, we introduce the Flexport Consumption Forecast.

A forecast based on real-time data is better and more complete than one based solely on historical data. To that end, and to address the questions raised from an economics and logistics perspective, we’ve created the Flexport Consumption Forecast. This corresponds to the U.S. Bureau of Economic Analysis’s Personal Consumption Expenditure figures.

In short, the Flexport Consumption Forecast (FCF) shows the outlook for real (i.e. inflation-adjusted) Personal Consumption Expenditures on a seasonally adjusted basis.

Users’ Guide

What is the Flexport Consumption Forecast and how should it be used?

As seasonally-adjusted real numbers, these forecasts provide a guide to whether we will see a boom or a bust. The detailed forecasts indicate whether different sectors are moving in parallel or diverging. Because they are seasonally adjusted, this is not a good guide to the raw volume of goods being purchased. It’s normal for more goods to be purchased in Q4, and it’s already baked in.

What products does it cover?

This covers everything in the Personal Consumption Expenditure report. At a broad level, that means services, durable goods (those that are meant to last three years or more), and nondurable goods. But we go further than that. For the goods categories we look at a number of subcategories, providing a new level of detail not generally seen in consumption forecasts.

Now will you rest on your laurels?

Nope. We plan to turn this out monthly. Unlike this initial holiday preview, it will generally come out in the middle of the month and cover the next four months beyond what the government has reported. If that sounds a little convoluted, it’s because we will only see October numbers at the end of November, so an updated forecast of October would still have value, even in the middle of next month.

Methodology

There are two main ways economists predict future numbers. One is to solve a big structural model of the economy. The other is to look carefully at how numbers follow trends and project those trends out in sophisticated ways. The Flexport Consumption Forecast follows the latter approach but enhances this “time series” method with insights gleaned from Flexport data. There is generally a relationship between what ships in September and what people consume in November. Our methodology takes advantage of that correlation to produce a more accurate forecast. These are forecasts and there will be misses. But those misses are likely to be smaller than they would be without Flexport data.