Shopping spree
Retail sales, a measure of purchases at stores, restaurants and online, climbed a seasonally adjusted 0.7 percent in July from June according to the Commerce Department.
This is the strongest report since March and reminds us that the consumer remains a source of fuel for the economy. Retail sales have grown for five straight months.
Consumers have the confidence to spend as they see income gains and a positive outlook for job growth. Since their spending accounts for more than two-thirds of U.S. economic output, this should help offset slower manufacturing numbers and weakening business investment.
Manufacturing slows
Industrial output fell last month as the manufacturing sector continued to struggle. Trade-related headwinds, weak global growth and a strong dollar crimped demand for U.S. exports all have taken a toll on manufacturers this year, weighing on U.S. expansion, the longest on record.
The Federal Reserve said, U.S. manufacturing output, the biggest component of industrial production, fell 0.4 percent in July from a month earlier.
The longer-term trend in manufacturing production shows the sector is pulling back: output has fallen more than 1.5 percent since December 2018.
In other news, the Institute for Supply Management (ISM) published their Purchasing Manager’s Index for July at 51.2 percent, down from 51.7 percent in June. Any reading over 50 represents a growing factory sector; however, this is the lowest reading since April 2016.
Job gains in July
The Bureau of Labor Statistics reports that the economy added 164,000 new workers in July from June. This is near the average job additions, roughly 165,000, in the first 6 months of 2019. Pulling down the headline number, positive highlights included +31,000 in professional and technical services, +30,000 in health care, +20,000 in social assistance, and +18,000 in financial activities. construction, manufacturing, and the transportation and warehousing industries remained relatively unchanged from the previous month. Trucking added 2,000 jobs in July, 0.1 percent above June and 2.4 percent above July 2018.
Weekly real wages, that is, weekly wages adjusted for inflation, were up 1.2 percent in June from June 2018. This was the 27th consecutive year-over-year increase. Overall, July showed positive signs for the labor market as inflation-adjusted wages continue to rise and the unemployment rate remains low.
Motor Carriers under pressure
Trucking shutdowns have spiked this year, the soaring insurance premiums are just one cause. Indiana-based A.L.A. Trucking shut down in early June and company owner Alan Adams blamed the FMCSA’s scoring system for fleets that caused a spike in insurance premiums.
A.L.A.’s insurance for this 41-driver company climbed from $340,000 to more than $700,000 in one year, pushing them out of business. How the FMCSA scores carriers are questionable as these safety ratings directly impact insurance costs.
Other trucking companies have cited low freight rates, lack of freight and other reasons for their shutdown. Just last week, Schneider National announced it was shutting down its First to Final Mile business due to a lack of profitability. That shutdown put nearly 800 drivers out of work.
In addition to Schneider’s announcement last week, three of the largest closures so far in 2019 have been New England Motor Freight, Falcon and LME.
Current trucking market
DAT Solutions reports in the week ending August 4th, load-to-truck ratios increased in the last week of the month, with higher volumes in key markets. The urgency subsided by the end of the week, leading to a softer start to August. National average rates in July were down compared to June, but van and reefer rates were higher than May's averages.
July spot truckload freight volumes and rates saw gains from June to July, according to the DAT Truckload Freight Volume Index.
- A 6.8 percent increase in shipments of dry van freight from June to July
- The national van rate, at $1.84 (and includes fuel surcharges), slipped five cents from June, but marked the second highest monthly average for vans going back to March
- The national average van rate was down 43 cents annually compared to the historic levels set in July 2018, despite July 2019 volume being up 12 percent annually
Rail remains slow
The Association of American Railroads (AAR) reports that U.S. rail traffic slipped over 5 percent in July amid declining rail volumes for coal, grain and intermodal.
U.S. rail volumes in July totaled 2.58 million carloads and intermodal units, a 5.5 percent drop from July 2018. Of those volumes, U.S. rail operations originated 4.8 percent fewer carloads and 6.1 percent fewer intermodal units compared to July 2018. July’s U.S. carload volume was 1.26 million carloads, while U.S. intermodal container and trailer volume totaled 1.31 million intermodal units.
Where are the reductions? Coal, grain and intermodal are the segments that have slowed.
At Wagner Logistics
The kids are headed back to school and I can feel those late summer days are upon us. At Wagner, we continue to implement new operations for clients while focusing on process improvements. We are seeing rising shipment levels as we build momentum into the holiday season.
Thanks go out to our IT group as they connect a slew of new customers into our systems and create customer focused dashboards to improve visibility into operations.
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!