Retail – Looking good
Amazon enjoyed an exceptional Q2, posting the best online net store results since Q4 in 2017. The introduction of Prime’s one day delivery is thought to be a factor in that growth.
As for the remainder of the retail space, sales rose 0.4 percent from May. Core retail sales, which excludes motor vehicles and gasoline stations, was up a whopping 0.7 percent last month and increased 3.8 percent from a year earlier.
Besides a 2.8 percent drop in sales at gasoline stations (fuel prices fell) the only disappointment was that sales at department stores continue to fall, declining 1.1 percent and 5.2 percent from May and June 2018. This is thought to be more of a structural trend as on-line retailers take market share.
Online retailers saw increases of 1.7 percent from May and 13.4 percent from June of last year.
Consumers still feeling positive
Americans remained relatively confident about the economy in early July and their expectations for longer-run inflation firmed.
The University of Michigan said its index of consumer sentiment was 98.4 in July, up slightly from June’s final reading of 98.2.
A wide partisan split continues in the Michigan survey between downbeat Democrats and upbeat Republicans. The overall sentiment index for self-identified Democrats was 75.5 in July, versus 121.5 for self-identified Republicans. Independents were in the middle, clocking in at 100.5 for the month.
Consumer spending, which accounts for roughly two-thirds of U.S. economic activity, has been strong in recent months, helping to drive economic growth in the second quarter. May’s spending was revised higher to a 0.5 percent increase from an earlier estimate of a 0.4 percent gain. Spending was also up 0.6 percent in April and 1 percent in March.
Housing is mixed
Home-buyers bought more new homes in June, a bright spot in the troubled housing sector.
Purchases of newly built single-family homes increased 7 percent according to the Commerce Department. The increase follows two straight months of declines.
New-home sales are a relatively narrow slice of all home sales. About 90 percent of homes purchased were previously owned.
Existing-home sales are moving in the opposite direction. Sales in that market fell 1.7 percent in June to a seasonally adjusted annual pace of 5.27 million, the National Association of Realtors said. Sales declined 2.2 percent compared with a year earlier, marking the 16th consecutive month of annual declines in sales.
Industrial real estate continues its strength
Real estate owner and developer behemoth, Prologis, said that its metrics call for moderate but strong growth in industrial real estate markets. They are expecting 6 percent growth in rents compared to 8 percent last year and a vacancy rate of 4.5 percent.
Demand for warehouse space is on about a 250 million square foot run rate.
Manufacturing trends lower
The manufacturing sector lost further momentum last month, slipping to its lowest reading in nearly three years in July as weak global growth, a strong dollar, and trade tensions continued to pressure factories.
The Institute for Supply Management said its manufacturing index fell to 51.2 in July from 51.7 in June. Readings above 50 indicate activity is expanding across the manufacturing sector, while those below 50 are a sign of contraction.
July marked the fourth straight month of slowing expansion in the index, and it was the weakest reading since August 2016.
Trucking market remains challenging
The DAT US National Long-Haul Van Freight Rate Index which measures the average long-haul spot rate for dry van truckloads in the U.S. excluding fuel and other accessorial charges averaged $1.50 per mile in June. This number fell well below expectations according to the freight futures settlement price which started the month over $1.66/mile, meaning futures market participants expected rates to be much higher than they were this June.
The impact of 2018 is still being felt today. Rates may not be as high as they were a year ago, but there is still a level of uneasiness about how quickly the situation can change, and the pendulum can swing the other direction.
In addition, the American Trucking Associations’ June advanced seasonally adjusted For-Hire Truck Tonnage Index declined by 1.1 percent in June, after also falling 4 percent in May. The June index equaled 115.2, compared with 116.5 in May. The index uses 2015’s 100 as its reference point.
The June index was up 1.5 percent when compared with the same month in 2018, making it the smallest year-over-year gain since April 2017.
Then we have the Cass Freight Index Report that said its June shipments index dropped another 5.3 percent, following May’s 6 percent drop. Volume has now been negative for seven months in a row. In its June report, Cass said the shipment index has gone from “warning of a potential slowdown to signaling an economic contraction.”
In the week ending July 28th, DAT Solutions reports spot market rates have dipped this month, but volumes and pricing for July are still on track to beat May's numbers. Van rates were mostly stable last week, with upticks in load counts out of key markets like Los Angeles, while volumes out of California gave reefers a lift. Flatbed rates peaked early in July.
The national average spot rate for dry van in July came in at $1.85 vs. $1.89 avg in June.
Intermodal shows weakness
The Intermodal Association of North America (IANA) reports intermodal volumes were nearly down across the board in the second quarter, according to the most recent edition of their Intermodal Market Trends & Statistics report.
Total volume (4,559,065) was down 3.8 percent annually, marking the second straight quarter of annual declines after a lengthy stretch of gains going back to the third quarter of 2016. The first quarter of 2019 was down 1.5 percent annually, following 4.7 percent and 4.2 percent annual gains from the third and fourth quarters of 2018, respectively.
IANA noted that the second quarter declines were a continuation of the first quarter, with loose trucking capacity and softer prices compared to a robust 2018, which it said created more intense competition with intermodal than a year ago and resulted in major domestic intermodal traffic declines. It noted that the ongoing tariff-related issues intensified throughout the quarter, with slowing international volumes, coupled with container imports, notably on the West Coast, facing challenges.
All rail traffic dipped for the week
U.S. rail traffic dipped 4.4 percent to 534,498 carloads and intermodal units in the week ending July 27 compared with the same week a year ago, according to Association of American Railroads (AAR) data.
U.S. railroads logged 261,706 carloads, down 3.5 percent, and 272,792 intermodal containers and trailers, down 5.3 percent.
For the first 30 weeks of 2019 compared with the same period in 2018, U.S. railroads reported 15,513,354 carloads and intermodal units, down 3.4 percent.
At Wagner Logistics
We now enter the dog days of summer as people take their vacations before school begins again. I am thankful for the cross-training in our organization ensuring that our customers business is handled seamlessly.
I want to give recognition to the Wagner HR team for keeping pace with our increased need for qualified people as we grow the company. In the same vein, I thank the IT team who implements solutions enhancing productivity and visibility into the business we do.
We have several start up operations underway and I thank everyone involved in executing the plans.
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!