Supply Chain Blog
Despite recession fears, the U.S. is doing just fine. Yes, the trade war and weather has created hardship, it should be noted that the Atlanta Fed’s GDPNow model is tracking the second quarter GDP growth at 2 percent. Consumer spending is keeping the economy chugging along into the longest economic expansion in history.
Looking back, 2018 wasn’t a good year for the budgets of shippers according to the latest State of Logistics Report from the Council of Supply Chain Management Professionals. Transportation and inventory-carrying costs jumped 11.4 percent last year, and logistics-spending is 8 percent share of total economic output matched the highest level reported in the past decade..
Let’s take a look at the current numbers as we reach the end of the second quarter.
Between the rain, tornados, flooding and threats of additional tariffs, there are plenty of headwinds in getting products to market. Add to this the annual Roadcheck this past week and you have an additional hurdle to pass.
Last year during Roadcheck, inspectors pulled over 67,603 trucks over the three-day period. This last week inspectors at 1,500 locations focused on steering and suspension while checking other systems. Many owner operators decide to take the week off, reducing capacity this past week.
Let’s take a look at the economic and logistics numbers.
As Memorial Day approaches I want to extend a sincere wish that you and your family have a safe holiday weekend. It’s a special time of year that offers not only the beginning of summer, but a time of reflection and gratitude. Traditionally, this holiday represents a tribute to our military heroes who have given their lives defending freedom. It’s also a time to remember those who have left a lasting memory in each of our lives.
Let’s take a look at the economy and freight trends.
While the circus in Washington continues and the U.S. battles China in trade negotiations, the economy surprised everyone in Q1. The U.S. economy roared back in the first quarter, growing at a rapid pace which suggests the current expansion has more room to run amid its 10th year.
Gross domestic product, adjusted for inflation, rose at a 3.2 percent annual rate from January through March, the strongest rate of growth in the first quarter in four years.
Net exports (exports minus imports) added 1.03 percentage points to the quarter’s GDP growth rate. That was the category’s largest boost to growth since the second quarter of last year.
Consumer spending, however, which makes up two-thirds of economic activity, rose at a mere 1.2 percent rate in the first quarter, down from a strong 2.5 percent in the fourth quarter of 2018. Consumers reined in purchases of big-ticket items like vehicles and their spending on services.
The first quarter is traditionally the weakest of the year. The Fed left interest rates unchanged and reiterated its pledge “to be patient” on adjusting rates in the future.
Let’s look at the current numbers.
Mixed economic numbers are coming as the freight market remains soft. Of course, after a historically robust 2018 the market was bound to weaken. There is plenty of freight moving but capacity is up. It appears the smaller carriers added capacity while the larger carriers held the line on fleet expansion.
It appears capacity will continue to rise; class 8 truck orders remain high and truck prices continue to rise for three year old preowned equipment. The question is, will freight volumes rise to meet these added trucks for the remainder of the year?
GDP is projected to be at 2.5 percent in 2019, freight should start flowing back in earnest this spring and summer. Let’s look at the numbers.