Surging freight rates from Asia to the US and EU have risen so high that brands are now torn between either maintaining their prices to hold onto customers (but do so at a loss of profits) or raise prices and let the consumer grapple with price increases. It’s not an easy call. Consumer demand, which has gone crazy during the pandemic, could reverse course with little warning as spending shifts towards services. The US is forging ahead with a total reopening of entertainment, schools and travel. The UK is pushing forward to ‘return to normal’ and there’s rising pressure in the EU to reopen, COVID or not. Governments can no longer contain consumers and businesses are also putting heavy pressure on lawmakers. <h3><b>Will Spending on Services Save the Day?</b></h3> Durable goods, the mainstay of consumer spending in 2020, are likely to fall from favor over the next year as people shift spending to services, according to a recent report from Deloitte, which pointed out that there’s only so much gym equipment and furniture that people can buy. The same is true for non-durables. Overall, services spending is likely to expand by 6.2% in 2021, with the momentum likely to accelerate from the latter half of the year into 2022, said Deloitte. Spending on eating out and travel continues to surge. However clothing sales will see catchup growth, since many wardrobes had been neglected during the time of social distancing and working from home, according to a June report from financial advisory Kiplingers. Even with a slowdown in spending on goods, the imbalance between imports and exports is still expected to severely impact supply chains through early 2022, according to several logistics analysts. <h3><b>No Ceiling (no capacity either)</b></h3> Freight rates are making history as there seems to be no ceiling on the heights to which rates can surge. And now heading into peak season there is no reason to believe that things will get better. In fact, most buyers are worrying about how much worse they can get (when they’re not losing sleep over ongoing COVID-related lockdowns in key sourcing nations). Asia to the US is critical. Asia to Europe is worse. Rates from the Indian Subcontinent region are at peak-like levels with no end in sight as export demand continues to grow. Another rate hike is scheduled for the second half of July, following a rate increase in the beginning of the month. <h3><b>Stealing from Peter to Pay Paul</b></h3> In reality, adding more capacity to meet rising demand is a matter of shifting equipment from other less busy routes (such as Europe to South America) to service high volume routes like ex-Asia. But then there is only so much equipment serving those routes to begin with. Thus, it is not likely to do much to alleviate the pressure on Asian exports, especially with peak season looming on the horizon. China is adding new services on its rail links into Europe with a new service going directly to France. While Home Depot made headlines a few weeks ago when it announced that it had chartered a carrier to ensure it’s merchandise hit its stores on time, that option is not widely available. Ships and planes take years to build and with demand for capacity rocketing, there’s unlikely to be much equipment that hasn’t already been spoken for. Most brands are realizing that air freight is likely their only option. With many factories running behind schedule, suppliers are now being forced to ship via air, or miss customer deadlines. Neither option is attractive. Unless brands can raise retail prices enough to offset some of the rising freight costs then it could com For now, it’s a carriers’ market, with both buyer and seller feeling the pain.