U.S., China Warehouses Filled To The Brim With Non-moving Goods

Warehouses in China and the United States are crammed with unsold televisions, refrigerators, and sofas, a sign of diverging pandemic recoveries that could put renewed strain on global supply chains and shake up the merchandise selection in U.S. stores, David J. Lynch reported for the Washington Post.

Photo Insert: Finished goods inventories in April exceeded 21 days of sales for the first time in at least 12 years.

Merchandise is piling up in each country for various reasons. In the U.S., consumers are spending more on in-person experiences like restaurant meals rather than accumulating goods, as they did last year, resulting in record retail stockpiles.

China's inventories are rising as a result of the government's "zero-Covid" policy, which has reduced consumer spending in recent months while allowing many factories to continue operations.

According to Capital Economics, a research consultancy, finished goods inventories in April exceeded 21 days of sales for the first time in at least 12 years.

The sale of these mountains of goods will determine the growth rates of the world's two largest economies. Discounts required to clear warehouse space on both sides of the Pacific could provide some retail bargains for American consumers, though economists say any savings on leaf blowers and laptop computers will do little to reduce the 8.6 percent inflation rate.

The inventory tumult is the most recent chapter in the global economy's halting performance since 2020.

“We really have a multispeed global economy today,” said Gregory Daco, chief economist at Ernst & Young. “There’s a timing mismatch and a demand mismatch between goods available and goods sold,” he added.

The Chinese economy came to a halt this spring as China's commercial capital, Shanghai, and its 26 million residents were shut down, while the U.S. recovered from a disappointing first quarter, with consumers racing to resume their pre-pandemic lifestyles.

After battling for more than two years to get enough goods into the country, many U.S. companies now have too much of some items and not enough of others. The disconnect between overflowing warehouses and shifting consumer tastes reflects the challenge that many businesses are facing as the economy twists and turns in unpredictable ways.

Uncertainty about the future sent the S&P 500 index, the broadest stock market gauge, into bear market territory on Monday, down more than 20% this year. The inventory buildup comes as chronic shipping bottlenecks have eased.

Imports into the U.S. fell $13 billion in April compared to March levels, implying less demand for space on container ships. According to the Freightos index, the cost of shipping a standard container from China to the U.S. West Coast has dropped by 37% since May 1. On Friday, 20 cargo ships were awaiting berths off the coast of Southern California, down from a record 109 in January.

WEEKLY FEATURE : MVP Group Keeps Lights On During Pandemic