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February 15, 2024–U.S. retail imports are expected to rise in the first half of 2024, driven by increased spending on the part of consumers, who seem undaunted by continued elevated interest rates as employment remains high and new lines of credit are tapped.

Ports have yet to report their actual figures for January, but the National Retail Federation (NRF) projected the month at 1.81 million Twenty-foot Equivalent Units (TEUs) of retail imports, up 0.3% year over year.

Citing the Global Port Tracker produced by Hackett Associates, the NRF forecasts that February retail imports will be up 20.4% year over year, March up 5.5%, April up 2.6%, May slightly up at 0.3% and June coming in at a 5.5% YoY increase.

Matthew Shay, President and CEO of the National Retail Federation (NRF) said January 2024 retail sales were a continuation of the “strong performance” shown in December 2023 as consumers remain “optimistic and willing” due to “growing employment and wages.”

The national unemployment rate remains low at 3.7% and another 353,000 jobs were added to payrolls on February 9, while GDP growth in the last quarter of 2023 was an impressive 3.3%, according to Tom Barkin, president of the Federal Reserve Bank of Richmond.

Still, Barkin told the Economic Club of New York that the Fed is unwilling to lower interest rates at the moment given several uncertainties in the marketplace, including the labor market, the housing market and what he called “deglobalization.”

“Businesses and consumers became painfully aware that a series of unfortunate events—a severe winter storm, a fire at an overseas plant or a blocked shipping lane—could snowball into snarled supply chains, goods shortage and a spike in costs,” Barkin said. 

Retailers are highly aware of that cluster of problems, as underlined by NRF Vice President for Supply Chain and Customs Policy Jonathan Gold who said the situation in the Red Sea is bringing “volatility and uncertainty” that are being felt around the globe.

“U.S. retailers are working to mitigate the impact of delays and increased costs. However, the longer the disruptions occur, the bigger impact this could have,” Gold said.

That view is endorsed by Peter Sand, Chief Analyst for Xeneta, considered one of the world’s leading ocean and airfreight rate benchmarking and market analytics platforms in the shipping and logistics industry.

Sand told Cargomatic (see related article) that three issues are having an adverse impact on ocean carrier rates.

These include the problems in the Red Sea, reduced vessel passages along the Panama Canal and contract negotiations between the International Longshoremen’s Association and their employer, the United States Maritime Association.

These issues are combining to see more containerized cargo heading to the U.S. West Coast and are also contributing to an inflationary rise in ocean carrier rates, something that Sand says is “already underway.”

Consumers remain largely undaunted by the inflationary pressures coming out of increased rates along the supply chain and could even be adding to them, a point emphasized by Birkin in his speech to the New York Economic Club.

“A recent rebound in consumer sentiment, continued willingness of consumers to dip into savings and loosening of financial conditions could also introduce risk to the inflation outlook,” he said.

That scenario is already taking place, according to Fitch Ratings, which recently revised its annual real consumer spending forecast for 2024 upward to 1.3% from 0.6%—a forecast that supports the NRF’s view of increased imports this year.

Fitch said its revision reflected “the ongoing willingness and ability of consumers to draw down buffers of excess savings, which will likely support spending well into 2024.”

In particular, Fitch said that “consumer use of home equity lines of credit is now growing, which suggests consumers are slowly tapping into the significant increase in real estate equity built up since 2020. Credit card spending growth is starting to decelerate.”

Still, regardless of the source of their financial confidence, whether a strong jobs market, credit cards or home equity loans, U.S. consumers look likely to support the projected growth of retail imports for the foreseeable future—even if it means putting up with higher Federal interest rates for a little while longer.