Slow and Steady, Recovery Pushes On

John Wagner Jr. looks at figures from across the logistics industry and how they point to a slow but steady recovery for the US economy

There are a lot of numbers to discuss today; most of them show a slow, sustained growth trend for the U.S. economy.

June retail sales came in at a fairly anemic 0.2 percent according to the Commerce Department, after rising 0.5 percent in May. Auto sales took a breather too, contributing to lower than expected sales numbers.

When one takes away autos, gas, building materials, and food services to get to the “core” sales number, the sales number increases to 0.6 percent in June, which is more in line with expectations. The good news is that the trend continues to be positive. Since retail sales comprise one-third of consumer spending, that upward trend is important in order to sustain the U.S. economic recovery.

Generally the economy seems to be chugging along just fine as manufacturing, employment, and consumer spending are growing. Even home sales are in growth mode, while interest rates remain at historic low levels.

E-commerce sales were up 0.9 percent, gas stations up 0.3 percent, electronics/appliances up 0.1 percent, sporting

goods up 0.6 percent, and apparel up 0.8 percent. Garden stores and building materials didn’t fare as well, both falling by 1 percent.

I suspect these very modest increases are coming from consumers who are more frugal coming out of the recession. Wage growth hasn’t really taken off, while food and gas prices have zigged and zagged, putting pressure on the “everyman’s” budget.

In other good news, the U.S. trade deficit shrunk below forecast in May as record exports flowed out of the country. The Commerce Department said the trade gap was reduced by 5.6 percent, the biggest drop since November. That should be a boost for U.S. factories.

Exports of petroleum products, aircraft engines, automobiles and parts led the growth, which will improve U.S. GDP numbers. May exports were $195.5 billion while imports were $239.5 billion.

On the employment front, the Department of Labor said that job growth increased by at least 200,000 for the fifth straight month. Private sector jobs increased by 262,000 in June, and government employment rose by 26,000. Manufacturers added 16,000 jobs while construction disappointed with only 6,000 jobs added. For-hire trucking added 3,300 jobs, which brings the year-to-date total to 18,100. However, estimates indicate the trucking industry is still short as many as 30,000 drivers.

Transport News – Keeping Up With Volume

Speaking of trucking, a couple of indexes are reporting continuing strength in the industry. The Cass Freight Index, measuring freight volume and spending, showed bullish growth in June with expenditures up 4.2 percent from May and up 12.1 percent year over year. Shipment volume in June was up 2.4 percent from May and up 6.0 percent year over year.

The DAT North American Freight Index shows that spot market freight (freight not moving under contract) increased 50 percent from 2013. Capacity constraints coupled with produce season caused truckload rates to surge across all equipment types. Dry vans led the increased pricing up 15 percent; flatbeds were up 14 percent and reefers up 10 percent.

DAT also noted that freight volume on their load boards increased 9.8 percent in June from May, with van and reefer freight jumping 20 percent. They report that national average van rates jumped 7 cents, or 3.4 percent, to a record $2.15 per mile.

If we see a continuation of this kind of growth in freight without growth in truck capacity, freight will be out of balance and simple economics will push even greater pricing strength to freight carriers. In the past there always was an intermodal option, but even that solution is now flawed as railroads struggle with high volumes and weather to keep the trains moving on schedule, particularly in the Chicago market.

The big question is if carrier capacity will expand to keep up with the economic growth we are seeing? As they say in the horror movies, “I have a bad feeling about this!” Hold on tight as we see how high freight rates will get across all modes heading into the holiday season.

Speaking of intermodal, the Association of American Railroads reports that intermodal rail volume rose last month 6.7 percent from June 2013. Volume was 1.08 million units in June and rails experienced the highest weekly average EVER for a month at 269,346 units.

Expect historic records to be set for intermodal volumes this fall as retailers stock up for the holiday season.

Now let’s talk about parcels. In my last blog post I wrote about the move FedEx made to convert to dimensional pricing, matching UPS’s decision. I should point out that USPS has applied to the Postal Regulatory Commission for approval to lower some priority mail rates starting on September 7 this year.

The drop in pricing targets parcels transported up to 1,000 miles and weighing 3 to 40 pounds. Some zone pricing will drop more than 50 percent as the Postal Service tries to make some hay from the UPS and FedEx decisions to switch to DIM pricing.

When shopping your parcel shipping business, it would be wise to take a look at USPS.

Quelle: eyefortransport
Portal: www.logistik-express.com

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