Consumer confidence remains upbeat
The Conference Board said its index of U.S. consumer confidence, based on consumers’ assessment of current business and labor market conditions, increased to 129.2 in April from 124.2 in March. A separate index tracking consumers’ short-term outlook on income, business and labor-market conditions rose to 103 from 98.3.
Consumers who described business conditions as good rose to 37.3 percent in April from 34.7 percent in March while those who said conditions were bad decreased to 11.7 percent from 12.4 percent. Consumers were more positive about the labor market, with 46.8 percent saying jobs were plentiful, up from 42.5 percent in March.
Retail and inventories
Consumers spending rose in March, rising 1.6 percent during the month for the largest monthly gain in over a year. Growth during the month was boosted by surging sales at auto dealerships and gasoline stations. Core sales excluding these categories still expanded by a healthy 0.9 percent. Year-over- year growth in retail sales jumped back up to 3.6 percent as a result and looks to be on solid footing in the second quarter.
On the inventory side, the total inventory/sales ratio edged up to 1.39 in February, continuing a general upward trend for inventories that began in the third quarter of 2018. While much of the buildup in inventories in the fourth quarter was driven by tariff-related imports, poor sales are likely behind the continued buildup in inventories in the economy. As activity in retail and manufacturing begins to gain momentum, inventory/sales ratios are likely to come back down which will help the freight market.
Manufacturing up
Orders for U.S. manufactured goods rose 1.9 percent in March to a seasonally adjusted $508.19 billion according to the Commerce Department. Excluding transportation, factory orders increased 0.8 percent in March from the previous month.
Factory orders excluding defense products were up 1.7 percent in March from February while new orders for durable goods increased 2.6 percent from February.
However, an index of factory activity produced by the Institute for Supply Management has been slipping since August, falling to 52.8 in April, the lowest reading since October 2016. That suggests that U.S. manufacturing is still growing but at a slower pace. Readings above 50 indicate activity is expanding, while those below 50 are a sign of contraction.
Labor continues to tighten
The Labor Department reports that U.S. employers picked up the pace of hiring in April and the unemployment rate fell to a half-century low, adding to signs of healthy U.S. economic growth. The economy added a seasonally adjusted 263,000 jobs in April, and joblessness fell to 3.6 percent, the lowest level since December 1969.
Private-sector workers saw solid wage gains, with average hourly earnings up 3.2 percent in April from a year earlier, matching the prior month’s increase.
Baby boomers are retiring in greater numbers. Labor-force participation among adults age 25 to 54 also declined in the past two months, but their rate is up from a year earlier.
Productivity improves
Productivity is key when it comes to rising wages and last quarter’s improvement coincides with better economic growth. Output of nonfarm businesses rose at a 4.1 percent annual rate in the first quarter, the Labor Department said
Productivity improvements are a key ingredient for the U.S. economy to maintain a 3 percent growth rate, a goal of the Trump administration. That is especially true as a tight labor market and low unemployment make it more difficult for employers in many industries to fill job openings. The available remaining workforce simply doesn’t have the needed skills.
Current freight market
As I have said before, the freight market has been uneven in the first quarter as ample truck capacity has driven down pricing. Capacity and spot rates should reach an equilibrium in the second quarter while contract rates will gradually fall through the year.
Predicting market movements is as much an art as a science, nobody knows exactly what is going to happen. As we enter produce season and weather events occur, rates will rise from the floor we have seen recently.
The most recent DAT Solutions data on spot rates nationally shows this trend starting in May. For the week ending May 5th the average dry van rate was $1.82 which is above the April average. Of the top 100 trucking lanes, 53 were up, 35 were down, and 12 were neutral.
Spring has also brought increased demand as the van load-to-truck ratio rose 10 percent after climbing 25 percent the week before.
Intermodal continues to lag
After strong growth in 2018, intermodal volume fell 1.5 percent in 2019’s first quarter to 4,477,728 units, according to the Intermodal Association of North America's (IANA) latest Intermodal Market Trends & Statistics report.
Following a modest drop in the fourth quarter, intermodal marketing companies' volume decreased 7.1 percent in Q1, the first time since the last recession that both intermodal and highway loads declined in the same quarter.
Rail traffic down but improving
According to Association of American Railroads (AAR) data, U.S. rail traffic continued to swoon in April, but fared better than in March. U.S. railroads originated 1,041,544 carloads, down 0.9 percent, and 1,056,146 intermodal loads, down 3.9 percent compared with April 2018 volumes.
Through 2019's first four months, U.S. roads logged 8,769,756 carloads and intermodal units, down 1.9 percent year over year.
For the week ending April 27, U.S. railroads registered 533,190 total units, down 3.3 percent compared with the same 2018 period.
At Wagner Logistics
The Wagner team enjoyed the celebration at the Intercontinental hotel last week as CEO, Brian Smith accepted the Champion of Business award on behalf of the Wagner team. His walk-up music was “Takin’ Care of Business” by BTO, an appropriate selection.
This week I attended the Tompkins Supply Chain Leadership Forum and heard Jim Tompkins (the guy who coined the term “Amazon Effect” in 2012. The focus was on building a strong organization that is nimble and flexible, anti-brittle.
He stressed that its important to understand the how today’s supply chain requirements and solutions shape the future of supply chain excellence.
What can Wagner Logistics do for you? If you are considering new distribution centers or a freight RFP I hope you will give Wagner an opportunity to serve you. We have an extensive history of 73 years of service to our customers and would love the opportunity to collaborate with you.
As we say every day, Bring it!
Have a great day,
John Wagner Jr.
About Wagner Logistics
Wagner Logistics was founded in 1946 on the principle that every customer is a big deal and that continues to pervade our mentality, producing a superior customer experience. The company began in trucking and remains dynamic offering top-notch transportation, dedicated warehousing and robust fulfillment services. We strive to produce innovative solutions, in addition to our superior onboarding process which makes transitions seamless, and have been honored 18 years in a row by Inbound Logistics as a Top 100 3PL. Our customers drive our entry into new geographic markets, technological advances and ever-changing distribution challenges. Where do you want to be? Wagner says, Bring It!