Good news & bad news

On the bad news side of the ledger, the Institute for Supply Management (ISM) published their Purchasing Manager’s Index for August showing a reading of 49.1 percent, down from 51.2 percent in July. This was the first contraction since August 2016. Any reading under 50 percent represents a shrinking factory sector, the measure has slipped in the wrong direction.

ISM reported that 9 of the 18 manufacturing sectors saw growth in August, including: Textile Mills; Furniture & Related Products; Food, Beverage & Tobacco Products; Wood Products; Petroleum & Coal Products; Nonmetallic Mineral Products; Machinery; Miscellaneous Manufacturing; and Chemical Products. The seven industries reporting contraction in August — in the following order: Apparel, Leather & Allied Products; Fabricated Metal Products; Transportation Equipment; Primary Metals; Plastics & Rubber Products; Paper Products; and Electrical Equipment, Appliances & Components.

The good news is that the Census Bureau reports that factory orders in July for all manufacturing industries rose 1.4 percent, following a 0.5 percent gain in June. Excluding the volatile transportation sector, factory orders edged up 0.3 percent from June.         

Year-over-year, factory orders increased 0.4 percent in July, after contracting the two previous months. Additionally, excluding the transportation sector, factory orders slipped 0.2 percent, the second consecutive fall. Manufacturing accounts for about 11 percent of U.S. output.

Retail sales look good

Americans continued to open their wallets in August, supporting the broader economy at a time of recession fear. Retail sales, a measure of purchases at stores increased a seasonally adjusted 0.4 percent in August from a month earlier, according to the Commerce Department.

In addition to these good numbers, July’s retail sales were revised higher, to a 0.8 percent gain.

The increase in retail sales in August was driven by a 1.8 percent jump in spending on vehicles. Excluding motor vehicles and parts, retail sales were flat in August.

Consumer spending is the main driver of the U.S. economy, accounting for more than two-thirds of economic output. Retail sales account for about 25 percent of personal-consumption expenditures.

Employment still a bright spot

The ADP National Employment Report said the nonfarm private sector in the U.S. added over 50,000 more jobs in August than economists expected, helped by strong growth in midsize businesses and in the service sector. The private sector added 195,000 jobs.

Midsize businesses (between 50 and 499 employees) added 77,000 jobs. Those gains were followed by small businesses (between 1 and 49 employees) added 66,000 jobs. Large businesses (500 or more employees) added 52,000 jobs.

The gains for August were mostly in the service-providing sector, which added 184,000 jobs, according to the ADP report. The education and health services industry added 58,000 jobs, followed by leisure and hospitality’s 42,000 jobs. Trade, transportation and utilities added 39,000 jobs.

The Labor Department’s report confirmed job growth saying U.S. employers added a modest 130,000 jobs in August. Excluding all government hiring, the economy added just 96,000 jobs in August, the fewest since May.

The unemployment rate remained 3.7 percent, near the lowest level in five decades. And more Americans entered the workforce in August, a positive development that increased the proportion of adults who are either working or seeking work to its highest level since February.

In addition, average hourly pay rose 3.2 percent from a year earlier, outpacing inflation and increasing Americans' spending power.

Inflation remains mild

Inflation increased 0.2 percent in July and 1.4 percent from a year earlier, evidence that inflation remains mild. Excluding food and energy, core prices rose 0.2 percent in July and 1.6 percent from a year ago.

The inflation figures fell short of the Federal Reserve’s 2 percent target, as they have nearly continuously since the Fed set its target in 2012. The Fed targets a modest amount of inflation as a cushion against deflation, a destabilizing drop in prices and incomes.

Consumers are keeping the economy afloat, but growth has still slowed this year, to a 2 percent annual pace in the second quarter from 3.1 percent in the first three months of the year.

Freight market ticking up for truckers

The larger trucking companies are reporting that they are seeing volumes returning to more normal seasonality. The weaker players being shook out of the market and the drug and alcohol clearinghouse scheduled to take effect on January 4th, truck capacity should be reduced by early next year.

As for the spot market, according to DAT Solutions, the strong close to the month of August continued into September as spot truckload rates increased during the week ending Sept. 8th.

The number of posted van, refrigerated, and flatbed loads from Sept. 2nd-8th, which included Labor Day, fell 7 percent compared to the previous week while the number of available trucks declined 12 percent. Declines of 20 percent are more typical for a shorter workweek.

Hurricane Dorian altered supply chains with rates and volumes rising on many lanes into and out of coastal areas. Because the worst of the storm missed heavily populated areas in the United States, the effects on transportation thankfully were not as severe as originally forecast.

National Average Spot Rates, September 2019 (through Sept. 8)

  • Van: $1.88 per mile, 7 cents higher than the August average
  • Flatbed: $2.21 per mile, 1 cent higher than August
  • Reefer: $2.19 per mile, 5 cents higher than August

Railroads are still lagging

The Association of American Railroads (AAR) said U.S. railroads started off September with another decrease in rail traffic.

The railroads logged 469,285 carloads and intermodal units for the week ending Sept. 7 compared with the same week a year ago. Total carloads for the week were 238,988 units, down 5.6 percent, while intermodal volume was 230,297 containers and trailers, down 7.5 percent.

For the first 36 weeks of 2019 compared to the same period in 2018, U.S. freight railroads reported 18,669,432 carloads and intermodal units, down 3.7 percent.

At Wagner Logistics

We are back from the holiday and tackling the challenges. Wagner continues to add business requiring additions to our Solutions team. These folks are tasked with developing the processes and work flow in our facilities. Combining engineering and technology to help drive efficiency and productivity is the name of the game.

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!