After being forced to hunker down indoors for months, consumers are cautiously venturing out to resume shopping at their favorite stores. As restrictions are gradually lifted, people are now free to purchase items other than food and essentials. This is good news for retailers who were forced to close their doors due to the ongoing pandemic.
However, for some shoppers, their first experiences going to stores might be disappointing. Some people will encounter empty shelves that were fully stocked with seasonal merchandise before the shutdown, or a confusing display of products that appear hastily arranged to occupy space. Consumers see the results of a double-digit decline in imports and the disruption in international trade that has resulted from COVID-19.
According to the Global Port Tracker report released by the National Retail Federation (NRF), imports are experiencing a double-digit decline this spring and summer. “Factories in China are largely open, and stores that closed here in the U.S. are starting to open, but volume is far lower than what we would see in a ‘normal’ year,” said Jonathan Gold, NRF Vice President for Supply Chain and Customers Policy.
- Imports in April down 13.4 percent
- Imports for May down 20.4 percent
- Imports for June down 18.6 percent
Halt to the Flow of Goods
The historic decline in the flow of goods is a critical issue that impacts the global economy. The World Trade Organization (WTO) has seen international trade dry up and come to a screeching halt. It believes 2020 will be remembered as one of the worst trade years in modern history. A recent WTO report estimates that international commerce could decline 13 percent this year. However, there’s a distinct possibility that things can worsen with trade dropping as much as 32 percent.
Analysts have mixed opinions about whether imports will
return to pre-pandemic levels after the virus is contained, or if the current
situation foreshadows a permanent change in the global flow of goods and
services. The concept of globalization is waning in popularity in certain political
circles, and among companies. They are now less likely to depend on a specific
country or part of the world to supply essential goods.
Dependence on Foreign Goods
The Coronavirus has exposed how dependent the U.S. and other nations are on foreign countries to manufacture critical supplies and medical products in short supply. Political leaders across the globe have expressed their concern and are taking action to resolve the situation.
During a coronavirus task force update, White House economic advisor Peter Navarro said, “We are dangerously over-dependent on a global supply chain.” The Trump administration has been vocal about reducing the trade deficit and has enacted national policies that have withdrawn the U.S. from trade agreements they view as unfavorable to the U.S.
When speaking on a local radio program, Bruno Le Maire, the French Finance Minister, addressed the long-term consequences of COVID-19 and how it has forced countries to rethink globalization. He believes, “France needs to reduce our dependence on certain great powers like China.” Whereas the Japanese have allocated $2 billion to help manufacturers move facilities out of China to Japan.
Shoppers Essential to Recovery
The stimulus checks consumers received from the government were meant to jumpstart the economy by creating a surge in spending. That scenario didn’t happen. People are losing their jobs, and others are gripped with fear that they could end up in an unemployment line. It’s understandable why shopping took a back seat to saving and preparing for an uncertain future. Consumers are saving money at a rate of 33 percent, a historic high. The money is still available for consumers to spend, and it will ultimately find its way back into the economy—but the question is how fast will this happen.
“Much will depend on the consumer’s willingness to return to spending.” Hackett Associates Founder Ben Hackett said. “Our view is that second-quarter economic growth will be significantly worse than the previous quarter, but we continue to expect the recovery to come in the second half of the year, especially the fourth quarter and 2021. This is based on the big and somewhat tenuous assumption that there is no second wave of the virus.”
Jonathan Gold of the NRF believes, “Shoppers will come back, and there is still a need for essential items, but the economic recovery will be gradual, and retailers will adjust the amount of merchandise they import to meet demand.”
There are many variables related to the government, private sector, and containing COVID-19 that are critical to rebuilding the economy. Consumers must feel secure that spending freely and engaging with others will not cost them even more in the long run.