Proving Our Mettle, Earning Our Stripes – Stuck in the Muddle With You

With the economy still stuck in the mud, the news is once again positive, and once again negative; highlighting the continuing challenges facing both consumers and the shipping public.
 
The Institute for Supply Management’s index of U.S. manufacturing showed contraction for the third month in a row, falling 0.2 percent to 49.6 in August. Any reading below 50 indicates contraction. This three-year low is extremely disappointing news as manufacturing has been a strong economic driver.
 
ISM’s services index moved in the other direction, showing expansion as it moved from a 52.6 reading in July to 53.7 in August. This index reflects the nonmanufacturing parts of the economy (financial, retail, and transportation sectors), and represents two-thirds of the U.S. GDP.
 
Speaking of retail, Target, Costco, Limited, and others reported strong sales in August based on stores open at least one year.
 
The Bureau of Labor Statistics reported that business productivity rose at a 2.2 percent annual rate during the second quarter this year after falling 0.5 percent in the first quarter. That is quite a nice jump in how much an employee produces for every hour of work. Productivity improvements are important in holding down inflation, so this is great news.
 
With 368,000 unemployed people giving up looking for work, the unemployment rate fell to 8.1 percent from 8.3 percent. Only 96,000 net new jobs were created as companies continue to hold back from hiring, reflecting uncertainty in planning for taxes and potential new regulations given the political season and the financial cliff approaching at year-end.
 
In trucking, the Cass Freight Index dropped by 1.1 percent in August, confirming what many believe is a softening truck market. Historically, we should have seen a 2 percent increase but shipment volume fell in August, which is unusual going into the holiday shipping season.
 
Several publicly held carriers from ABF to FedEx have reduced their earnings guidance, reflecting the decline in shipment volume. Pricing is flat from July to August, further reflecting the downturn in volume. Other big factors for trucking are the growing cost of fuel and increased driver pay, now almost mandatory as carriers look for ways to slow down their 100+ percent driver turnover.
 
An interesting side note is that in several states, departments of revenue are looking for motor carriers operating in their state that are failing to file tax returns. They are cross-referencing fuel tax filings with income tax rolls.
 
Intermodal continues its upswing in volume as the Association of American Railroads reports a 6.5 percent increase in volume year-over-year in the week ending Sept. 1. Container traffic rose 8.2 percent to 218,857 units for the week. Trailer and boxcar traffic fell 4.2 percent and 3.4 percent respectively.
 
I have previously warned about a possible strike at East Coast and Gulf ports represented by the International Longshoremen’s Association. The ILA and management negotiator United States Maritime Alliance will resume negotiations the week of Sept. 17, according to the Federal Mediation and Conciliation Service. Hopefully, an agreement can be reached in time for the peak shipping season, but is still advisable for shippers using these ports to have a Plan B in their back pocket.
 
At Wagner we are seeing seasonal volume at higher levels than in 2011 and working to further roll out systems improvements. There is also heavy volume for packaging projects, fulfillment and transportation.
 
Several companies have asked to use our planning tools to help with their network analysis. 2013 forecasting is under way and we would love to work with your challenges to craft a solution. Bring it!

Quelle: eyefortransport

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