Vaccine delivery
In December we will begin to see the distribution of Pfizer and Moderna vaccines which are tricky to transit. The Pfizer vaccine travels at minus 80 degrees while the Moderna vaccine just requires refrigeration.
Pfizer’s vaccine requires a deep freeze and the company has developed a special box for holding its doses packed with dry ice. UPS tells us they are developing dry ice manufacturing capabilities to help in shipping although there is a shortage of co2 which may complicate matters.
Both will need the green light from federal health regulators which is expected to come soon under emergency authorization. Phase one will be implemented meaning that health care workers and nursing homes will get the first doses.
Consumer concerns
The University of Michigan’s index of consumer sentiment dropped to 77.0 in the two weeks ended Nov. 10, from 81.8 in October.
The index is the first read on consumer attitudes since President-elect Joe Biden’s victory and President Trump’s campaign launched efforts to contest the election results, which came amid rising coronavirus infections and hospitalizations.
Republicans’ economic outlook in early November fell while Democrats’ worries about the coronavirus resurgence likely offset any increased optimism about the economy. Nearly 60 percent of Democrats reported that the pandemic had dramatically changed their daily lives, compared with just 34 percent among Republicans.
A daily index of consumer sentiment by Morning Consult, a data intelligence firm, fell to 90.6 in the week ended Nov. 10, down 1.4 points from the previous week, pulled down by declining confidence among Republicans. Attitudes among Democrats rose slightly.
The University of Michigan’s release follows signs of continuing economic recovery including declining jobless claims last week and rising employment and manufacturing and service activity in October.
Consumers spent modestly in October
U.S. shoppers boosted their buying more slowly in October, another sign the U.S. economic recovery is losing steam as coronavirus cases increase across the country.
The Commerce Department said that retail sales, a measure of purchases at stores, restaurants and online, rose a seasonally adjusted 0.3 percent in October from a month earlier. That was well below a 1.6 percent increase in September and marked the smallest monthly rise in retail sales since May, when spending rebounded from sharp declines in the early phase of the pandemic.
While spending on vehicles, electronics and at home-improvement stores increased last month, sales dipped in key categories like grocery store, clothing and restaurant spending.
Employment numbers move the wrong way
The number of applications for unemployment benefits rose sharply last week, indicating continued challenges for the U.S. economic recovery as coronavirus infections increased around the country.
Initial claims for jobless benefits, a proxy for layoffs, rose to a seasonally adjusted 742,000 last week, up from the 711,000 filed a week earlier. That level is more than three times higher than the roughly 210,000 typically filed each week in the first two months of 2020, though it is down sharply from a peak of nearly seven million in late March.
At present levels, initial jobless claims are still higher than they were in any other recession on record.
Employers have continued to expand head counts in recent weeks. The number of people collecting unemployment benefits through regular state programs, which cover most workers, fell to 6.4 million for the week ended Nov. 7 from 6.8 million a week earlier, on a seasonally adjusted basis, according to the Labor Department. Continuing claims declined throughout the summer and into the fall, as many laid-off workers found jobs or exhausted their state benefits. The number of people collecting these benefits has now fallen below levels reached in 2009, during the last recession.
Industrial production slowly improves
The latest industrial production numbers from the Federal Reserve showed some modest improvement with a gain of 1.1 percent. This is a nice contrast with the revised numbers from September which showed a decline of 0.4 percent. The gains are still not putting the numbers back to where they were before the lockdowns started in March. The level of output is still 5.6 percent below that pace.
The manufacturing segment is the largest share of the index and it rose by 1.0 percent compared to a 0.1 percent rise last month. There was a big gain as far as utilities were concerned as colder weather arrives, up by 3.9 percent. The mining segment fell by 0.6 percent and is off by 14.4 percent from a year ago. There has not been a resumption of demand for oil and that keeps dragging this data down.
Current freight market
With retail inventories lower than desired the push to restock shelves is intense. Carriers with consumer or essential goods customers are likely seeing the lion’s share of volume, while those with mall-based retail or industrial/construction-related clients are not seeing as much of a recovery.
Capacity continues to be tight in truck markets. Truckstop.com’s market demand index, which measures the ratio of spot loads offered versus trucks available to haul them, set an all-time record the week of Oct. 2 at 117.72. For the week ending Oct. 9, rates were at October record levels – approximately $2.44 per mile. Although the market softened somewhat later in the month, for the week ending Oct. 16, the average broker-posted rate per mile excluding fuel surcharges was still about 29 percent above the same week last year and about 23 percent above the five-year average.
The markets imply a tight pricing marketplace, and it would appear there will be upward pressure on contract rates that will carry into 2021.
This has led to increased confidence among trucking companies and a surge in truck and trailer equipment orders and an upturn in used equipment pricing. Equipment purchases that were delayed in the spring are coming back onto the books.
This is not to say we are off to the races. There is still significant cost inflation on the insurance side, and there is about to be driver wage inflation as fleets compete for available talent. Some fleets will continue to struggle. However, truck markets seem to be an oasis.
Trucking markets are largely stable heading into Thanksgiving, albeit at very high spot rates and rejection rates. We aren’t seeing a market like 2019, which popped nicely into the holidays, or a market like 2018, when a year and a half of rate inflation began its collapse in the fourth quarter despite peak retail season.
UPS said that it’s been running at peak volumes since June, and maybe that’s a good way of thinking about current freight market data: The normal gauges that we use to measure market activity are almost maxed out. It’s unlikely that tender rejections go meaningfully higher, even if brokers’ jobs get harder in the weeks ahead, and as delivery windows get tighter, brokers may pay carriers more to keep their freight off the load boards.
DAT Solutions reports that in the week ending November 15th, truckload demand on the spot market has declined. With holiday retail freight in place and consumer packaged goods now sitting in warehouses for online shoppers, a slight dip occurred. That's pushed load-to-truck ratios lower, but localized capacity constraint continues to keep pressure on pricing.
The chart below shows the national average rates for the month to date, including fuel surcharges.
Rail intermodal rebounds
The U.S. intermodal-rail traffic growth trend continued during the week ending Nov. 7, with trailer and container volume increasing 10.3 percent to 293,746 units compared with the same week in 2019, according to Association of American Railroads (AAR) data.
The carload volume trend continued its downward slide, however. U.S. railroads logged 228,282 carloads during the week, down 8.4 percent. Carload and intermodal volumes combined; U.S. rail traffic climbed 1.3 percent to 522,028 units.
At Wagner Logistics
As we head into the Thanksgiving holiday, I am thankful for my associates at Wagner Logistics and their “Bring It” commitment they demonstrate every day in caring for our customers.
Having gotten through Covid 19 myself in September, I’m thankful for the gift of health and wish everyone health and happiness throughout the holidays.
What may Wagner Logistics do for you? We have an extensive history of 74 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 20 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!