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Anticipating record growth in 2021

March 31, 2021
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Anticipating record sales growth in 2021

Anticipating record sales growth this year, US retailers are planning to import nearly 25 percent more cargo in the first half of 2021 than they did in 2020. Signaling little relief for the US port network already sagging under a record import surge.

US retailers project a 23.3 percent year-over-year increase in imports in the first half of 2021 based on anticipated retail sales growth of 6.5 to 8.2 percent this year compared with 2020. The March Global Port Tracker, published by the National Retail Federation and Hackett Associates, said continued strong online sales growth, plus more in-store sales made possible by the distribution of COVID-19 vaccines, should generate even stronger retail sales and therefore increasing imports as the year progresses.

“The successful distribution of vaccines will help ensure that the economic recovery will likely be strong and sustainable,” Ben Hackett, founder of Hackett Associates, said in a statement accompanying the Global Port Tracker.

Shipping executives and industry analysts said, US imports from Asia will remain strong into the summer months, and most likely through the 2021 season. Unless a significant amount of new capacity is added, carriers will retain pricing power this year, as they have since they implemented a series of general rate increases and premium surcharges for equipment and space guarantees last summer on vessels leaving Asia.

Year-over-year monthly comparisons of import growth through June will be unusually large as they will be benchmarked against dismal import numbers in the first half of 2020. US imports collapsed in the first half due to factory shutdowns in China in February and March during the early months of the coronavirus disease 2019. That was followed by demand destruction in the US last spring. Imports rebounded sharply beginning in late June and remained strong through 2020 and into 2021.

The NRF’s retail sales forecast that was released on March 3 said sales this year could exceed 2020’s sales growth of 6.7 percent, driven in large part by robust online shopping.

“The pandemic has helped the growth of online shopping, which increased 21.9 percent last year and is expected to grow between 18 percent and 23 percent this year,” NRF’s chief economist Jack Kleinhenz said in the forecast.

USD to RMB Exchange Rate

September 23, 2020
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Currently, what ignites market’s interest has been focused on a few questions:

What is the Yuan’s exchange rate with the US Dollar?
Is the trend sustainable as the global economy normalizes with vaccination advancement?
Where will the RMB exchange rate go at end-2021, particularly will it break the psychological level of 6?

What is the yuan’s exchange rate with the US dollar? The exchange rate between the Chinese yuan and the US dollar, is the value of one currency against the other. The yuan’s exchange rate to the US dollar is quoted as USD/CNY to represent how many yuan it takes to buy one US dollar. In China’s case, a lower yuan exchange rate figure indicates a stronger Chinese currency as it means it takes fewer yuan to purchase one US dollar.

China’s Yuan (RMB) has gained more than 10% against the USD since June 2020, and currently stands at about 6.45. This has eaten into profits as many of the exporters take payment in Greenback, due to suppliers and staff being paid in Yuan.

Is the trend sustainable as the global economy normalizes with vaccination advancement? Normally, except for the factor of historical high interest rate differentials which might last for a longer period, other factors will be normalized as the global economy recovers with the vaccine roll-out, as a result it will not become a reason to support the RMB exchange rate any longer. First, the economic fundamentals to support RMB in the past year such as growth divergence and exceedingly strong exports will sooner or later normalize together with the global economy recovery, although the timing is not certain yet. The continuing Covid-19 pandemic remains the prime risk to the global economy which is fraught of uncertainties of vaccine effectiveness and distribution. That means, the strong RMB momentum might only remain before the global economy normalizes.

Where will the RMB exchange rate go at end-2021, particularly will it break the psychological level of 6? Continuing flows into China’s bonds and stocks has one yuan bull predicting the currency could strengthen to a level not seen in nearly three decades. According to Liu Li-gang, chief China economist at Citigroup Inc, Bloomberg reports predicts the currency could rally by 10 percent to 6 per US dollar or more by the end of 2021. The yuan has not been that strong since late 1993, just before China’s unification of official and market exchange rates triggered a plunge in the currency. A rapid advance in the yuan could impair Chinese exports by making them more expensive. That will in turn hurt China’s growth, because outbound shipments have emerged as a key driver for the economy on global demand for its pandemic-related goods. Also, sustained appreciation in the currency could attract speculative money inflows, fueling local asset bubbles and creating financial risks. Policy makers will seek to slow the advance, said Dariusz Kowalczyk, senior emerging-markets strategist at Credit Agricole CIB.

At 7 Seas we will continue to monitor this trend and help our customers minimize the effects of the currency change. We can also help by exploring other low cost country alternatives. Please let us know how we can help.