Amazon Prime Shopping Day Hits Record – But is This a Good Thing?
RedStone Resource
July 17, 2023
Inside This Edition
Peak Season Inbound Estimates
The National Retail Federation and Hackett and Associates are predicting that inbound containers from July through November will be down 4.5% from last year’s volumes. The estimate by the NRF shows 9.78 million TEU’s expected between July 1st and the end of November versus 10.25 million that hit the US last year.
Canadian Port Strike is Over, But Delays Could Take Weeks to Unwind
A port worker strike at selected Western Canadian ports has ended, but the impact of that work stoppage could take weeks to alleviate. The 13-Day strike headed into the heavy peak season has backed up an estimated $7.5 billion in cargo offshore.
Producer Prices Show Deceleration Continuing
The Producer Price Index was released recently, and it showed that prices for various modes of transportation were still decelerating through June. The Less-than-Truckload Producer Price Index was down 11.5% year-over-year, and it also became weaker sequentially by 1.0% month-over-month. And yet, for those comparing to the pre-pandemic era, prices are still 20% higher than they were in the same month in 2019.
ECONOMIC BRIEFING
Inflation-Adjusted Imports of Goods Down Through Q1
Analysts are mixed on whether a record sales day on Amazon’s Prime Shopping Day is a good sign for the supply chain and the broader economy, or a sign of challenges to come. Amazon’s Prime Day is filled with deep discounts on many products, and sales hit $12.7 billion this year, up 6.1% over last year’s volumes. This is good news in the sense that it moved a lot of products through the e-commerce system.
Amazon mentioned more than $6.3 billion was spent on the second day of the event on non-essential items like toys and appliances. This could have been a sign that consumers were doing early Christmas or back-to-school shopping, which could pull back on some of the incremental sales during the traditional holiday shopping period between November and December. Inventories are still heavy across many retailers, but early seasonal sell-through could give purchasing managers more confidence that consumer spending will remain resilient and the need to keep steadily replenishing inventories will boost global supply chain and manufacturing activity.
Amazon also reported that discounts this year were nearly double what they were last year. The average discount this year on electronics and apparel was between 12-14%.
Peak Season Inbound Estimates
The National Retail Federation and Hackett and Associates are predicting that inbound containers from July through November will be down 4.5% from last year’s volumes. The estimate by the NRF shows 9.78 million TEU’s expected between July 1st and the end of November versus 10.25 million that hit the US last year. Interestingly, the number of inbound containers looks stronger in the back-half of the peak season than in the front. Volumes are reportedly weaker than expected over the summer months, some lackluster back-to-school building activity. November volumes are expected to be stronger this year than last, with an additional 100,000 containers expected in the US versus last year.
Inventory levels are still very high, and many segments of the product-moving sector are sitting with levels elevated vs. pre-pandemic levels. Approximately 65% of the nation is overstocked at this time, but interestingly it is the retail sector that has done a good job of getting inventories back down into a range that will allow for some rebuilding. If sell-through is better during this peak season, more aggressive rebuilding activity will follow in 2024 and global supply chain activity will improve.
TRANSPORTATION BRIEFING
Canadian Port Strike is Over, But Delays Could Take Weeks to Unwind
A port worker strike at selected Western Canadian ports has ended, but the impact of that work stoppage could take weeks to alleviate. The 13-Day strike headed into the heavy peak season has backed up an estimated $7.5 billion in cargo offshore. Some ships were able to divert cargo to alternative US ports, but there is still a significant backlog sitting offshore. And with more inbound shipments headed toward those ports, the backlog will take at least the next 2-3 weeks to unravel, and some estimates suggest it could stretch well into August.
Producer Prices Show Deceleration Continuing
The Producer Price Index was released recently, and it showed that prices for various modes of transportation were still decelerating through June. The Less-than-Truckload Producer Price Index was down 11.5% year-over-year, and it also became weaker sequentially by 1.0% month-over-month. And yet, for those comparing to the pre-pandemic era, prices are still 20% higher than they were in the same month in 2019.
Prices in the truckload sector according to the PPI were down 4.3% M/M and were down a sharp 24.7% year-over-year. DAT Trendlines was showing trucking spot prices down 22.6% year-over-year in June.
Rail sector prices were down 0.3% M/M and were down a slight 0.4% Y/Y. The rail industry did not experience the same surge in prices that trucking experienced over the past two years. But the rail sector took a more measured, steady rate of increase over that period of time and prices have not adjusted down as sharply as other modes.
Heading into the peak season, ports are experiencing some activity but not the same as in previous years. Most estimates suggest that total inbound container volumes will more closely mirror those from 2019.
