Supply Chain Blog
Spring has sprung and midwestern rivers have overflowed their banks causing havoc for railroads and truckers alike. The heavy snowfall of the winter has met the warm spring air wiping out rail tracks, bridges and roadways. Interstates have closed at places causing lengthy alternative routes in Nebraska, Iowa and Missouri. Heavy rain is forecasted across the Midwest this weekend won’t help matters.
As this water works its way east to the Mississippi I expect more problems.
Economic numbers are coming in showing the slowdown that started in December has not yet subsided. Freight is moving, however, if history follows we should see increased traffic in April and May after a long, hard winter.
Let’s look at the numbers.
It’s been a news filled week with 16 Democrats running for president (not counting Biden), Boeing 737 Max problems, college-gate and the public waiting to hear from Mueller.
Regardless, there were some economic numbers released that affect logistics and transportation. These numbers explain why transportation providers have seen a softening in the market in January and February, we expect this to reverse itself as we enter the second quarter.
Let’s look at the numbers.
It continues to be a rough winter as we enter March. It’s hard to believe we are in the final month of the first quarter, there’s is a lot of numbers coming in.
The Commerce Department said Thursday the gross domestic product (GDP), a broad measure of the goods and services produced across the U.S., rose at a 2.6 percent annual rate in October through December, adjusted for seasonality and inflation. After strong GDP performance in the second (3.4) and third quarters (4.2) the year ended at a modest pace.
Due to weaker global growth and the tapering effects of 2017’s tax-cut boost, slower growth is expected this year, Federal Reserve is predicting 2.3 percent growth in 2019. With strong support from high employment and rising incomes, the rough winter is driving down the GDP in the first quarter this year.
Consumer spending, accounts for more than two-thirds of the economy, rose at an inflation-adjusted, annualized rate of 2.8 percent in the fourth quarter, pulling back from the third quarter when it rose at a 3.5 percent rate. Consumers bought big-ticket items while their spending on services and nondurable goods slowed.
Let’s look at some more economic and logistics numbers.
As we hit the halfway mark in the first quarter, winter won’t give up. A pattern of storms crisscrosses the country causing daily disruptions. I remain hopeful the groundhog was right about an early spring as catchers and pitchers are reporting to spring training.
Meanwhile, the economy keeps chugging along and job growth continues. All eyes are on the trade negotiations with China and the expectation is that there will be a positive result later this week.
Transportation capacity appears to have reached a balanced point and that is affecting spot pricing as rates continue to stair step down week after week.
Let’s looks at some economic and transportation news.
The arctic front that passed through the Midwest found us with temperatures as cold (or colder) than the North Pole. Freight lanes through the region became unbalanced as snow and ice caused significant delays.
Thief River Falls, Minnesota, saw minus 77 degrees on Jan. 29th, according to the National Weather Service, while the mercury plummeted in Grand Forks, N.D., to 65 degrees below zero. By the next day Chicago, IL was at minus 23, and central Iowa down to minus 35.
As this weather moves east I anticipate further issues with trucks and trains moving on time. Regardless, the freight market appears to have achieved some balance as truck capacity has become available.
As you read year-over-year comparisons this year, keep in mind that 2018 was the mother of all freight markets, the 2019 numbers are bound to look weaker. This does not mean we are in a weak market.
The federal government is back at it, at least for now. Limited economic data is one of the casualties of a closure, but we do have some numbers to look at.