Article by John Wagner Jr from Wagner Logistics published on August 20th 2013
This week I am attending the JOC Inland Distribution Conference in Kansas City, and it is full of solid speakers offering great updates on the state of the transportation and distribution industries. Before I get into some great learning from the conference, let’s look at some key economic news.
The Federal Reserve postponed tapering off quantitative easing until stronger economic news becomes more consistent. The unemployment and underemployment numbers are not falling as fast as the Fed would like to see, so they will keep pumping $85 billion into the economy each month.
There were 7.9 million Americans who wanted to work full time in August but could only find part-time work. When these workers and people who want a job but have stopped looking are included, the total underemployment rate rises to 13.7 percent. There is still a lot of work to do to prop up the economy.
U.S. consumers were careful shoppers in August, with sales only rising 0.2 percent over July. The Commerce Department said auto sales led purchases. If you take auto sales out of the equation, retail sales were up only 0.1 percent for the month. This is considered a sign of weakness, as it looks like back-to-school was a nonevent.
The Thomson Reuters/University of Michigan index of consumer sentiment fell to a five-month low of 76.8 this month from 82.1 in August, as consumers lowered their expectations. I suspect this is because of the tough talk in Washington as we close in on budget negotiations and debt ceiling deadlines.
Lower retail sales are driving economists to revise GDP expectations for the remainder of the year. Third-quarter growth is expected to be only 1.7 percent as consumers look at rising interest rates, the Washington budget fight, and Middle East disruption of the flow of oil causing higher gas prices.
The core producer price index (PPI) excludes food and energy and it remained flat from July to August, foretelling a weak demand for consumer goods.
Shipping News Forecasts Holiday Trends
Retailers must believe that consumers will change their tune and find their wallets this holiday season. The Global Port Tracker report forecasts a 5.1 percent increase in import volume at 13 major container points as retailers load up on inventory.
Global Port Tracker says that U.S. ports handled 1.43 million TEUs (20-foot equivalent units) in July, a 5.4 percent increase over June and an increase of 1.1 percent year over year. The forecast says August is up 4.1 percent, September up 5.1 percent, October up 9 percent, November up 2.2 percent, and December will be up 1.3 percent in a year-over-year comparison.
The total volume for 2013 is forecast at 16.2 million TEUs, up 2.5 percent from 2012.
According to the Retail Industry Leaders Association, the fall shipping season will see only a 3 percent increase due to the slow economy affecting retail demand and more conservative inventory practices. Seasonality seems to be decreasing.
News from the JOC Inland Distribution Conference
I have been impressed by the quality of the presentations at the JOC Inland Distribution Conference. Chris Lofgren, CEO at Schneider National, noted that every strong nation in world history has, at its roots, a powerful trade economy. Here in the U.S. the government seems to be working against trade by not keeping up with infrastructure investment and by installing a hyper-regulatory environment that works against the freight industry. At $700 billion, the freight industry is 5 percent of the economy.
Truckload growth projections for the next three years are only 1.5 percent compounded, so it is not considered a growth industry. Publicly held truckload carriers’ capacity has shrunk and the average age of a fleet is 6.6 years.
Driver pay is the same as it was in 2005 and capacity is tight as regulatory changes reduce driver productivity. Dr. Lofgren went on to point out that “logistics is the powertrain of the economy.” He said driver pay needs to be 18 percent higher to attract new entrants.
The strength of intermodal was discussed in one session. With the hours-of-service regulations impacting truckload carriers, 18 percent of all intermodal loads are now dry vans. Intermodal pricing will keep pace, with truckload pricing used as the ceiling. Truckload line haul rates are expected to increase 3 to 5 percent in 2014.
Spinnaker today announced that it has entered into an agreement to acquire Plan4Demand.
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