Hi Friends, 

I hope everyone has a great fourth of July celebrating Independence Day. BBQ and fireworks were the order of the day for me.

After wrapping up the second quarter, the country continues to enjoy a strong economy while watching the laws of scarcity drive up the costs of virtually everything. Is this rate of inflation sustainable? I doubt it as supply chains return to some semblance of normal by the end of the year.

Politics in a nearly even Congress is brutal, and the infrastructure bill hangs in the balance.

Meanwhile freight capacity remains tight and pricing high for all modes.

Let’s look at the numbers.

Infrastructure consensus reached

A $1.2 trillion infrastructure package that would dedicate more than $100 billion to roads and bridges and send billions more to mobility projects nationwide was reached by President Joe Biden and a bipartisan group of senators on June 24.

Specifically, the infrastructure framework would propose $109 billion to repair roads and bridges, $66 billion for passenger and freight rail operations and $49 billion for public transit systems. It also would dedicate $47 billion for severe-weather infrastructure resilience projects to tackle climate change, $25 billion for the country’s airports and $16 billion for ports and waterway projects.

To fund the plan, neither the White House nor the bipartisan group of lawmakers endorsed raising fuel taxes or increasing the corporate tax rate. Instead, they agreed to redirect unused unemployment insurance relief funds, repurpose unused pandemic relief aid, reinstate fees for chemicals at environmental sites and facilitate the use of public-private partnerships at states and municipalities, among other financing proposals.

Consumers resume spending on services

Households increased spending in May on services that they shunned earlier in the pandemic, helping position the economic recovery for a strong summer as more businesses fully reopen and consumers unleash pent-up demand.

Spending was flat in May as consumers cut back on purchases of big-ticket items and rotated more of their money toward in-person services. Still, this spring shaped up to be a solid one for spending: April expenditures were upwardly revised to a 0.9 percent increase from a previously reported 0.5 percent rise. Overall spending in May was well above pre-pandemic levels, with spending on goods up nearly 20 percent from February 2020 and services down about 1 percent.

There are signs that suggest services spending has room to grow. For instance, spending on recreation rose 3.5 percent in May over the previous month, the Commerce Department said, as summer activities got under way. Airline travel has also increased, with scheduled seats on U.S. airlines climbing into the summer.

Vehicles and other products are in short supply amid a global computer-chip shortage, and other supply constraints across the economy have left manufacturers struggling to meet demand. These factors in turn have helped push up prices, raising inflation worries and prompting the Federal Reserve to signal it may raise interest rates sooner than previously anticipated.

The core personal-consumption expenditures price index, which excludes often-volatile food and energy items, rose 0.5 percent in May from a month earlier. Core prices increased 3.4 percent from a year earlier, the fastest pace since 1992. The Federal Reserve aims for 2 percent annual inflation to keep the economy growing at a healthy pace.

Spending has helped propel the broader U.S. economy, which grew at a 6.4 percent annual rate in the first quarter. Forecasting firm Oxford Economics estimates that consumer spending will grow around 9 percent this year, the strongest rate since 1946.

Consumer spending, which accounts for about two-thirds of economic output, is driving the early stages of the recovery. Americans, flush with savings and government stimulus checks, are spending more on goods and services, which they shunned for much of the pandemic.

Business spending increases

Nonresidential fixed investment, a proxy for business spending, rose at a seasonally adjusted annual rate of 11.7 percent in the first quarter, led by growth in software and tech-equipment spending, according to the Commerce Department. Business investment also logged double-digit gains in the third and fourth quarters last year after falling during pandemic-related shutdowns. It is now higher than its pre-pandemic peak.

Orders for nondefense capital goods excluding aircraft, another measure for business investment, are near the highest levels for records tracing back to the 1990s, separate Commerce Department figures show.

Rising business investment helps fuel economic output. It also lifts worker productivity, or output per hour. That metric grew at a sluggish pace throughout the last economic expansion but is now showing signs of resurgence.

Company executives are increasingly confident in the economy’s trajectory. The Business Roundtable’s economic-outlook index—a composite of large companies’ plans for hiring and spending, as well as sales projections—increased by nine points in the second quarter to 116, just below 2018’s record high, according to a survey conducted between May 25 and June 9. In the second quarter, the share of companies planning to boost capital investment increased to 59 percent from 57 percent in the first.

ADP reports hiring surge

Private payrolls increased by 692,000 last month, ADP said in its monthly employment report. The May count was revised to 886,000 from an initial reading of 978,000.

The June climb marks a sixth consecutive month of payroll growth as more Americans return to work. Various factors have contributed to a labor shortage in the spring, including COVID-19 fears, childcare costs, and bolstered unemployment benefits.

The leisure and hospitality and the education and health services sectors added the most payrolls, with respective increases of 332,000 and 123,000, according to ADP. Sectors that shed the most payrolls during the pandemic have been the biggest gainers in recent months as economic restrictions have reversed. The information sector lost 4,000 jobs in June.

Hiring across different-sized businesses broadened after largely being led by small firms. Businesses with fewer than 50 employees added 215,000 jobs through June. Firms with 50 to 499 employees added 236,000 payrolls, and businesses with more than 500 employees added 240,000 jobs.

Current freight market

It’s the summertime grilling season which also coincides with the annual peak of the produce season. This drives up demand for refrigerated carriers creating the seasonal high typically seen in reefer and dry van spot rates around Independence Day.

Spot truckload freight volumes increased 4.5 percent last week, said DAT Freight & Analytics. Capacity tightened as the total number of trucks posted to the DAT network declined 4.7 percent compared to the previous week.

The national average spot van, refrigerated, and flatbed pricing changed marginally compared to the previous week. The typical bounce ahead of the close of the second quarter and July 4 holiday did not occur, although the average van rate is nearly 67 cents a mile higher year over year and the reefer and flatbed rates are 78 cents a mile higher.

The following are the average spot rates for June, according to DAT:

Van: $2.67 per mile, unchanged from the May average

Flatbed: $3.15 per mile, 4 cents higher than May

Refrigerated: $3.09 per mile, down 1 cent compared to May

Rail traffic up

U.S. railroads logged 516,167 carloads and intermodal units during the week ending June 26, a 12.4 percent increase compared with the same week a year ago, according to Association of American Railroads (AAR) data.

Carloads for the week totaled 237,117 units, up 17.7 percent, while intermodal volume reached 279,050 containers and trailers, up 8.2 percent.

For some rail traffic categories, year-over-year percentage changes for the current week are inflated because of the widespread shutdowns and subsequent large reduction in rail volumes that impacted many economic sectors last year at this time.

At Wagner Logistics

Our associates at Wagner enjoyed the holiday although, in spots, teams had to work to pick pack and ship orders over the weekend. Our customers seem to be enjoying the renewed economy as heavy order volume is experienced.

As Wagner continues to work its many projects, we would love to work with you. If you are issuing a transportation RFP or have a distribution/fulfillment project, let’s schedule a call.

We are celebrating our 75th year of history of service to our customers and would really appreciate 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!