I was reading an article this morning that, in passing, blamed the slowdown in world trade on a switch in spending among consumers from goods to services. But not really:
It's true that spending on goods has been flat since mid-2021 while spending on services has continued to rise.¹ But trade is all about absolute numbers. Despite the difference in growth rates, spending on goods continues to be above its pre-pandemic trend while spending on services is below it. The big growth in spending on goods during the pandemic may have gone away, but it's come to rest at a very high level.
In a nutshell: Compared to spending just before the pandemic, goods are up 14% and durable goods are up 24%, while services are up only 2%. Whatever the reason for the slowdown in trade, it's not because we aren't buying dishwashers anymore.
¹These figures are for the US only, but I imagine consumer spending in Europe has followed a similar trajectory. Unfortunately, I can't find an EU breakdown by goods and services, so I'm not 100% sure about this.
This is simply a realignment of spending priorities. The COVID life priority shift is real. People are spending more on their actual physical lives because they discovered they want to spend more time at home, so they are, and less on things outside of the home. Of course, that switch is going to have a front-loaded spike, which appears to be what we're seeing with the slow decline in real expenditures on goods in 2022. But I would still expect it to be higher than the pre-2020 trendline (which should overall match inflation) with the services one being correspondingly lower than the pre-2020 trendline.
Put another way, if we set February 2020 as the starting part for this series, in about 5-6 more years we should see the trendlines are in line with inflation again - just at different level compared to pre-2020 trendlines.
Setting the baseline at Jan 2020 obviously might not make sense if you are trying to explain a slowdown in 2023.
If you set the baseline at 2021 or 2022, the charts actually contradict the argument ths Kevin is trying to make.
Im sure that the slowdown is in comparison to 2021 or 2022....not 2018 or 2019 as Kevin tries to argue.
Slowdown implies slower growth, not a reduction. Even accepting Kevins framing, slower growth due to a switch from goods to services looks pretty obvious on the charts.
Similarly, focusing solely on US activity to explain worldwide trade might not make sense.
This post doesnt make much sense.
Wanted to pop in to make a spending-adjacent comment about inflation. I keep seeing stories about how much more groceries cost. I think one reason for this is, for a long time, companies "raised prices" by reducing the size of their containers. 32 oz of mayonnaise became 30 oz. A 28 oz bag of broccoli is now 24 oz.
When people go shopping the usually get 1 or 2 of this or that, and would continue to do so without getting more because the sizes were (marginally) smaller. But the size-reduction has reached its limit, so it price hike time. And now the jar of mayonnaise is $5.49, up from $4.99. And the total bill for four bags of groceries goes up from $175 to nearly $200.