The traditional late summer to fall period is typically a bustling time for supply chains, with retailers racing to stock their shelves with clothing, electronics, and holiday decorations. Meanwhile, freight operators gear up to capitalize on the surging demand. However, this year’s peak shipping season is taking a different trajectory, marked by subdued activity.
Merchants and consumer goods suppliers are still grappling with the aftermath of excess inventories accumulated during the Covid-19 pandemic. At the same time, logistics companies are contending with tepid volume and freight rates significantly below those of the previous year.
Throughout the year, the arrival of goods at U.S. ports, spanning trucking and rail networks en route to distribution centers and stores, has consistently trailed behind 2022 levels. The National Retail Federation even forecasts a potential decrease in imports for September and October.
Logistics firms gauge shipping demand based on retailers’ inventory levels and their anticipated restocking pace. In July, the Logistics Managers Index hit its lowest point in its six-and-a-half-year history, coinciding with shrinking inventories.
Retail giants such as Walmart, Target, and Home Depot acknowledge progress in destocking but remain cautious about flooding the market without clear signals of consumer demand. Target’s Chief Financial Officer, Michael Fiddelke, emphasized their efficiency efforts and lean inventory approach.
Jason Miller, interim chair of Michigan State University’s supply chain management department, notes that retailer inventories remain high, particularly for items like clothing, household appliances, and smartphones. He opines that a weak peak season lies ahead.
Consumer spending patterns are shifting, with Americans allocating more funds to services and experiences, such as vacations and dining out, and cutting back on various goods. This shift has led large retailers like Walmart to focus more on essentials like groceries rather than consumer products filling vessels, trains, and trucks during the peak season.
Uncertainty in spending habits has prompted retailers like Macy’s and Dick’s Sporting Goods to reduce their orders. Macy’s Chief Executive, Jeff Gennette, highlighted consumers’ increased discretion in their spending choices.
Hopes that this year’s peak season would reinvigorate import volumes have been dashed as inbound trade has only marginally expanded this summer. Some ocean carriers have canceled trans-Pacific sailings and revised down their 2023 expectations.
Vincent Clerc, CEO of one of the world’s largest container shipping companies, Denmark-based A.P. Moller-Maersk, reports double-digit declines in retail and lifestyle shipments compared to previous years. Clerc expressed pessimism, stating there are no signs of an expected volume rebound in the latter part of the year.
Southern California’s ports of Los Angeles and Long Beach, typically a peak season hotspot, have seen no such surge this summer. Combined import volumes dropped by over 10% between June and July, reaching their lowest levels since December 2022.
In a potentially foreboding development, these ports are sending back fewer empty containers to Asia due to weak demand from factories. Exports of empty containers at the Port of Los Angeles in July plummeted by 39% compared to the same month last year.
Reduced container flow into the country translates to fewer loads for truckers moving goods from ports and rail yards to warehouses and distribution centers. The initial optimism among some truckers earlier this year has given way to a sense that recovery may still be months away.
David Jackson, CEO of trucking company Knight-Swift Transportation, cautiously predicts a modest seasonal uplift in the fourth quarter but refrains from calling a definitive turning point.
Intermodal rail transport, responsible for carrying containers and truck trailers inland from ports, has also experienced a slowdown this year. Intermodal volumes have reached their lowest levels in years, with little indication of increased freight in the pipeline.
Darren Field, president of intermodal at J.B. Hunt Transport Services, voices uncertainty about a significant peak season, emphasizing the need to wait and see how the economy unfolds.
