High prices, fewer choices: Inventory of summer goods is OK, but supply chain troubles loom

Medora Lee

The kids are alright – at least for the summer.  

Retailers say they’re already well-stocked with pool toys, bikes, helmets and fireworks to keep kids entertained this summer. But like everything else, prices will be higher. For example, expect to pay on average 15% more for fireworks, partly because of higher shipping costs, said William Weimer, vice president and general counsel at Phantom Fireworks, which has retail outlets nationwide. 

Beyond summer, though, inventories look less certain. With a COVID-19 surge in China prompting lockdowns and a war in Ukraine limiting supplies of raw materials, the supply chain is showing renewed strain.  

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Prices of used cars, which dropped last month, are expected to resume climbing as shortages of new cars persist.

Inflation’s here to stay 

Supply chain stresses, which Standard Chartered economist Madhur Jha said could worsen almost until year-end, probably mean inventories of many items could get lean again and prices will stay elevated. 

Even used car prices, which dropped 3.8% last month, are expected to resume climbing in the coming months as shortages of new cars push people to buy secondhand. Automakers are still having difficulty getting raw materials and semiconductors to produce new cars.  

Iris Pang, ING‘s greater China chief economist, noted a power failure in Taiwan last month curbed semiconductor production and could limit April’s supply, too.  

“These supply chain setbacks have been somewhat worse than we anticipated,” Goldman Sachs economists wrote in a research note last week. Its analysts lowered their global auto production forecast by 3.4 million units to 81.6 million this year. 

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“Right now, some businesses are scrambling to make sure we’re OK for the holiday,” said Steve Pasierb, president and chief executive officer of the Toy Industry Association. “Last year, trouble mounted quickly, so this year, orders are being placed earlier to get out of the factories sooner and shipped. Things are still taking 60 to 90 days to get here. Before, it was three weeks.” 

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And soon it may take even longer. Goldman Sachs said its measure of supplier delivery times in March worsened for the first time in five months, and Oxford Economics analyst Oren Klachkin said his measure of supply chain conditions deteriorated for the second straight month.  

Even with the best-laid plans, much remains out of retailers’ control. "We may do all that, but there could be a L.A. port strike,” Pasierb said. The West Coast ports in Los Angeles and Long Beach are the two busiest in the nation, respectively.  

The contract between the International Longshore Warehouse Union and the Pacific Maritime Association at the West Coast ports expires at the end of June. Negotiations are set to begin May 12, but retailers are on tenterhooks. Without a new contract, workers could strike and set off massive supply disruptions – again. 

“The contract negotiations will come at a critical time for the retail industry as the peak shipping season for the important holiday season begins this summer,” National Retail Federation President and CEO Matthew Shay wrote in a letter in February to the heads of both unions. 

“Any kind of additional disruptions at the ports would add further costly delays to our members’ supply chains and likely add to inflation concerns and further threaten the economic recovery,” Shay said last week. 

Medora Lee is a money, markets and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.