Many analysts called for a recession in 2023. But those concerns faded as consumers continued to spend and labor markets remained strong.
Key Takeaways
- 70%—the chance analysts gave to a 2023 recession. Despite the odds, the economy weathered the storm without a full recession
- 16% gains for the S&P 500 this year
- 4% inflation rate—the lowest since 2021
- 6% Prime Day spend increase
- 3.5% unemployment rate
Retailers and brands focused on inventory management and SKU rationalization to offset a possible recession in the first half of 2023. Economic indicators now suggest recession fears did not materialize.
Most notably, the S&P 500 bounced back, inflation concerns dissipated, earnings season beat expectations and Prime Day set records for the ninth consecutive year.
But shippers prepare for a muted peak season. How will this affect supply chain operations and labor heading into the busiest time of the year?
Positive peak season developments #
Economists overwhelmingly predicted the US would slip into recession, with one survey placing the odds at 70%. But the expected weakness hasn't materialized amid steady growth in consumer spending buoyed by a strong jobs market.
Instead of consumer fears and a weaker-than-typical peak season, shippers may face robust demand.
The stock market rebounded #
The S&P 500 finished the first half on a high note in June. The index jumped more than 6% in June and is up nearly 16% heading into Q3, regaining more than half of the bear market losses suffered in 2022.
The Bureau of Labor Statistics reported Tuesday that the inflation rate fell to 4%, the lowest level since March 2021.
Inflation diminished #
Year-over-year CPI inflation hit a 40-year high of 9.1% in June 2022. Then it fell for 12 consecutive months. Thursday's CPI reading increased the chance the Fed is approaching its final rate hike of the current cycle. The Bureau of Labor Statistics reported Tuesday that the inflation rate fell to 4%, the lowest level since March 2021.
Amazon grew worldwide Prime Day sales by 6.7% to $12.9B.
Corporate profits increased, and consumer sentiment improved #
H1 corporate profits surpassed analysts' projections, and the US economy grew at twice the rate the government initially estimated. Additionally, US consumer sentiment jumped in July to an almost two-year high, bolstered by easing inflation and a strong labor market. With promotional events like back-to-school shopping and early holiday discounts, the coming months may bring an additional retail turnaround.
Prime Day set records #
This year, Amazon grew worldwide sales by 6.7% to $12.9B. Shoppers bought more than 375 million items worldwide over two days, up from 300 million sold last year. Prime Day is typically an effective barometer for subsequent holiday spending patterns.
Supply chain challenges ahead of peak season #
Because of stronger-than-anticipated indicators, retailers and brands may face similar supply chain challenges to 2020 and 2021, this peak season. Many prepared for slow holiday shopping by implementing inventory reduction strategies. Now shippers may need more in stock for shoppers.
And with a stronger peak season, labor challenges will impact companies.
Thin labor pool #
The labor market does not have enough blue-collar workers. That means there aren't enough longshoremen, long-haul drivers, package handlers and other workers. These employees are critical to the logistics industry, especially during peak season when demand increases significantly.
LTL market challenges #
Yellow Corp., one of the nation’s largest freight providers, halted its operations and will file for bankruptcy— the largest in trucking history. The closure affects 30,000 employees. While it may help add more drivers to the labor pool, the closure will impact freight supply heading into peak season.
Yellow is one of the country's largest LTL providers specializing in partial and LTL volume. Its closure already drove up LTL rates. As demand for freight services increases in peak season, rates will continue to increase. It may also be more difficult to secure reliable capacity.
Implications of logistics challenges #
Supply chain disruption once again threatens retailers and brands this peak season. Demand for supply chain services continues straining nodes and increasing rates. As businesses prepare for peak season, leading enterprises identify their biggest failure points within networks and remove variability where possible.
