Consumers continue to spend
Americans went shopping in June which wrapped up a solid quarter despite trade war concerns.
The Commerce Department reported this week that retail sales, a measure of purchases at stores, restaurants and online, rose a seasonally adjusted 0.4 percent in June from a month earlier.
Four consecutive months of rising retail sales suggest consumers remain a source of strength for our nation’s economy. From a year earlier, retail sales were up 3.4 percent in June, and sales in April and May both logged in increases of 0.4 percent.
Online shopping was up 13.4 percent from June 2018 and 1.7 percent from May. Consumers also spent at clothing stores, restaurants and building-material supply stores. Meanwhile, gasoline-station sales fell 2.8 percent in June from the prior month.
Amazon’s Prime Day was this week, it broke records and other retailers who piggybacked onto the Amazon sales day, I expect strong retail numbers in July as well.
The Federal Reserve pointed to another sign of positive momentum this week, manufacturing, the oft-cited pocket of weakness in the economy this year, logged an increase in output last month.
U.S. industrial output was flat in June, as increases for the manufacturing and mining sectors were offset by a decline in utilities output. Output at factories rose 0.4 percent in June and the mining sector saw a 0.2 percent increase. From a year earlier, industrial production rose 1.3 percent in June.
The manufacturing industry accounts for about 75 percent of the nation’s total industrial output, and it got a boost in June from a 2.9 percent increase in motor vehicles and parts. The Fed said cooler weather affected utility production dropping 3.6 percent in June.
Jobs see a mild drop while PPI rises
The Bureau of Labor Statistics reports the number of job openings fell 0.7 percent to 7.3 million in May. Construction and transportation, warehousing, and utilities saw the largest decreases in job openings, dropping 15 percent. Net employment over the last 12 months, however, yielded a gain of 2.6 million employees.
In addition, the number of unemployed increased 1.5 percent to nearly 6 million in June. The unemployment level is ahead of job openings by one month.
The Bureau of Labor Statistics also reported that the Producer Price Index (PPI) for finished goods (measures the change in prices received by producers) and is an indicator of inflation at the wholesale level, decreased 0.4 percent in June.
The “core” PPI, which excludes food and energy, remained unchanged from May. Year-over-year, core PPI is up 2.3 percent, slightly below the last 12-month average of 2.6 percent. Trucking PPI, which includes fuel surcharges, was up 2.7 percent and 4.2 percent, compared with the same time last year for TL and LTL general freight.
June hiring - positive
The Labor Department reports employers added 224,000 jobs to payrolls in June while the jobless rate last month ticked up from a 50-year low to 3.7 percent in part because more Americans said they were looking for work.
Transportation and logistics companies added jobs at a strong pace in June. Couriers and messengers boosted payrolls by 6,500 jobs last month while trucking fleets added 4,300 jobs.
Overall, warehousing and transportation employers focused on freight and parcel business added 14,900 jobs on a seasonally adjusted basis from May to June.
The Commerce Department reports that U.S. business inventories rose moderately in May as sales rebounded, suggesting that inventory accumulation could have been a drag on economic growth in the second quarter. Business inventories increased 0.3 percent after advancing 0.5 percent in April. Retail inventories increased 0.4 percent in May instead of rising 0.5 percent as expected.
Retail inventories excluding autos, which go into the calculation of GDP, rose 0.3 percent as reported last month.
LTL Carriers see less tonnage and shipments
Less than truckload carriers are seeing the softness as other modes are. In mid-quarter reporting from the publicly held LTL carriers report that tonnage per day was down between 3 and 5.9 percent versus last year depending on the trucker.
These mid-quarter updates reflect not only weaker tonnage levels up against still challenging year-ago comparisons, but also the impact from harsh weather conditions and less spillover freight from a softer TL market.
The good news is that pricing remains rational which helps maintain the yield through their general rate increases (GRI).
Current truckload market
In the week ending July 14th there was a significant uptick in spot market activity following the fourth of July. Looking forward however, there's less urgency for truckload shipments. That led to declining van, reefer, and flatbed rates in many parts of the country.
Spot market rates for dry van and refrigerated (reefer) shipments in June were the highest since January, according to DAT Solutions, which operates the largest truckload freight marketplace in North America.
The uptick in pricing came as truckload capacity was more constrained in June.
Spot market van freight volume was 4.4 percent higher in June 2019 than in June 2018, according to the DAT Truckload Volume Index, which reflects the change in the actual number of loads moved each month. Compared to the first six months of 2018, van volume was 7 percent higher in the first half of 2019.
The national average van rate for June was $1.89 per mile, including fuel surcharges, which was 10 cents higher than May’s average. Year over year, the national rate was 43 cents lower, but the June 2018 average was also the highest van rate ever recorded.
Carrier bankruptcies rise
Numerous articles related to the Lakeville Motor Express bankruptcy suggest that the owners bankrupted the union carrier, resurfacing as a non-union carrier under LME and Finish Line Express brands. The NLRB ordered the $1.25 million in backpay to be paid starting within 60 days from April 30, 2019, or the amount would double to $2.4 million. It is not known if the backpay or fines were the cause of the sudden closure.
This is the sixth major closure in 2019. The others were NEMF, Falcon, Williams Trucking of Dothan, Alabama, and Indiana-based A.L.A.
On Friday, July 12, Ceres, California, based company Starlite Trucking announced that the company was closing after 40 years of servicing customers in eleven western states. Starlite officials blamed the high cost of equipment replacement coupled with compliance to California and U.S. regulations.
Carriers are feeling the squeeze between rising costs and lower pricing.
Railroads are feeling the pinch too
U.S. railroads started July the same way they ended June: a year-over-year decline in carload and intermodal volume.
The railroads logged 448,459 carloads and intermodal units for the week ending July 6, a 7.5 percent decrease compared with the same week last year, according to Association of American Railroads (AAR) data.
Total carloads for the week were 220,759 units, down 8.2 percent. Total intermodal volume clocked in at 227,700 containers and trailers, down 6.9 percent compared to 2018.
AAR reported that total second quarter U.S. carloads were down 2.7 percent in the second quarter, which marked an improvement compared to the first quarter’s 3.1 percent annual decline. Total U.S. intermodal volumes were down 5.7 percent in the second quarter. But even with the year-to-date declines, AAR reported that 2019 is on track to be the second highest intermodal volume year ever, second only to 2018.
At Wagner Logistics
The Wagner Wellness Committee is distributing summer heat bags containing water bottles, sunblock, and other items to help our associates while outside. None too soon as the temperature rises to a 110+ heat index reading in Kansas City.
Meanwhile, Wagner’s growth continues as we add a facility and continue to on-board new customers. After 40+ years in the business I can tell you that growth is exciting. Wagner’s continued growth is evidence of the fine people at Wagner who work every day to meet our customers expectations while providing legendary service.
What may 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!