Manufacturing is positive

Survey data from the Institute of Supply Management’s manufacturing index remained in expansionary territory at 52.1 in May trending down. The index fell for the second straight month. Both New Orders and Production components of the index have downshifted in recent months and point to below-average growth in upcoming months. Keep in mind that any reading above 50 signifies growth.

Inventories remain high as retail sales grow

Retail sales growth also exceeded forecasts during the month, rising 0.5 percent month-over-month in May after April’s results were revised up showing a 0.3 percent gain after initial reports of a 0.2 percent decline. Year-over-year growth has settled in the 3-3.5 percent range over the past few months, and the broad-based gain in May suggests that consumer spending should be solid going forward.

Regarding inventories, the total inventory/sales ratio rose to 1.39 in March, reversing the decline in the previous month. While much of the buildup in inventories in the fourth quarter was driven by tariff-related imports, uncertainty over trade policy has kept inventories high in the economy.

We need to keep an eye on employment and income numbers as this will affect retail and inventories.

Housing and construction

New home sales fell sharply for the second consecutive month, falling 7.8 percent in May from April’s levels. New home sales are now negative year-over-year despite a significant increase in housing inventory available for sale. Existing home sales, on the other hand, performed much better during the month, rising 2.5 percent from April’s levels.

Even with May’s declines, trends in both new home sales and housing starts are slowly beginning to trend upward. Solid job and income growth combined with easing mortgages rates should keep demand for home buying fairly solid in upcoming months, so the housing sector should make gradual improvements.

The spring is crucial to the housing market because roughly 40 percent of the year’s sales take place in March through June. May was the first month this spring when sales rose from the prior month but compared with a year earlier sales in May still declined 1.1 percent.

Consumer optimism falters

The Conference Board's index of consumer confidence fell to 121.5 in June, a nearly 10-point drop from May and the lowest level since September 2017. Consumers may be getting worried as they worry about escalating trade tensions and a cooling jobs market.

The University of Michigan said its consumer sentiment index was 97.9 in early June, down from 100 in May.

Durable goods mixed

Orders for long-lasting goods fell in May, reflecting a drop in civilian aircraft orders that disguised the underlying strength in capital goods.

Overall orders for durable goods, manufactured products intended to last at least three years, fell 1.3 percent in May from the prior month, the Commerce Department said.

When excluding the transportation category, orders grew at a 0.3 percent pace. New orders for nondefense capital goods excluding aircraft, increased 0.4 percent from April.

Trucking market is tough

Spot truckload rates certainly aren't where they were a year ago. In May, the national average spot van rate of $1.80 per mile was 35 cents below the average for May 2018. The average reefer rate was $2.15 per mile, 38 cents lower than May 2018. The flatbed rate averaged $2.27 per mile, 45 cents lower year over year.

Weather had a lot of effect on the market in April and May, but the market began to shift into a higher gear in June. Dry van and reefer freight volumes during the second week of June were each up nearly 20 percent compared to the previous week. Load-to-truck ratios were higher in Los Angeles, Atlanta and other high-traffic markets. So current freight conditions give no indication that activity has dropped off in June.

Indeed the 2018 mother-of-all freight markets in over ten years is over.  Spot rates have largely fallen back to where they were two years ago. The problem presented to many carriers is that many of their costs have not.

Carriers are feeling the squeeze as insurance costs have risen, equipment & maintenance costs climb and driver pay rises.

In the week ending June 30th the end of the second quarter brought higher truckload demand. The increased load-to-truck ratio pushed prices higher, with the national averages for van and reefer rates hitting their highest marks since January. The June averages for each were 10¢ higher than in May, while June's national flatbed rate was 3¢ higher than the May average.

The national average spot rate for vans increased 2¢ to $1.90 per mile which includes fuel surcharges.

Rail still soft

U.S. rail traffic fell 5.8 percent to 525,116 carloads and intermodal units for the week ending June 22 compared with the same week in 2018, according to Association of American Railroads (AAR) data.

Railroads posted 257,836 carloads for the week, down 4 percent, and 267,280 intermodal containers and trailers, down 7.5 percent. Petroleum and petroleum products were the only commodity group that logged a traffic increase, rising by 2,644 carloads to 14,062 units total.

Commodity groups that recorded decreases compared with the same week last year included coal, down 4,590 carloads to 78,543; nonmetallic minerals, down 2,085 carloads to 36,309; and metallic ores and metals, down 2,071 carloads to 22,662.

Through 2019’s first 25 weeks compared with the same 2018 period U.S. railroads reported combined traffic of 12,943,315 carloads and intermodal units, down 2.9 percent;

At Wagner Logistics

The IT team at Wagner has been busy rolling out systems improvements and on-boarding new customers. I’m excited about the improvements in Wagner’s parcel system that will optimize carrier selection which will help our customers maximize their parcel spend.

The transportation group is working ahead of the holiday to make sure that loads are covered and that costs are controlled. Truckers want to be home for the holiday too so rates always spike during the fourth.

All of us at Wagner wish you and yours a fun, safe Independence Day weekend!

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!