Supply Chain Blog

New Year Begins with Promise

 

Dear Friends,

By now you are back to work and the New Year is off to the races. Despite the electorates’ rejection of globalization, rapid advances in technology and the political status quo resulting in a new administration, consumer confidence surged in November and December. 

There has been a steady flow of positive economic data in December and I’m bullish on 2017. Keep in mind I tend to a positive optimist. 

These economic indicators should set up transportation/logistics professionals for a challenging year as there will be capacity constraints in the truckload market. In the warehouse market, industrial real estate is red hot with prices rising and no signs of a slowdown. With unemployment so low, wages are rising. 

The cost to serve customers with rising labor costs, real estate and transportation will be inflationary. It becomes as important as ever to be efficient to gain productivity to offset these rising cost factors. 

Manufacturing rises 

The Institute for Supply Management said manufacturing activity in the U.S. expanded in December with new orders and production reaching its highest level in two years. The ISM manufacturing index came in at 54.7 for the month, up from 53.2 in November. As a reminder with these measures, any reading over 50 signals expansion. 

The only negative is the strong dollar which is hurting exports. 

The Federal Reserve’s measure was a little more restrained as the Fed says factory output only increased 0.1 percent for the year. 

Construction spending is up 

For the second month in a row, construction spending increased going up by 0.6 percent in October and rising 0.9 percent in November. This the highest level of spending in the last ten years based on Commerce Department numbers. 

Construction of homes, nonresidential buildings and government projects were all up pushing total annual seasonally adjusted spending to $1.18 trillion. 

The nation’s gross domestic product, which measures the total output of goods and services, expanded at a rate of 3.5 percent in the third quarter of the year, according to the Commerce Department. This third and final estimate is up from a 3.2 percent rate estimated a month ago and a 2.9 percent estimate in late October. 

It's the best performance since the third quarter of 2014 and compares to a 1.4 percent rate in the second quarter of this year. The reading also beat a consensus estimate from analysts who forecast the GDP would be revised upward to a 3.3 percent rate. 

Business investment rises while durable goods order fall 

The Commerce Department said business investment in the U.S. increased in November, despite a decline in new orders for durable goods. They look at orders for non-defense capital goods (without aircraft) as a measure of business investment. 

Orders increased for electrical equipment, appliances and components, as well as computers and electronic products. November shipments for these core capital goods increased 0.2 percent after falling 0.3 percent in October. Shipments of all durable goods (products with a lifespan of three years or more) rose 0.1 percent in November. 

Trucking peak season returned 

There hasn’t been a traditional peak season for a few years and it returned in 2016 as freight volumes jumped in November. The American Trucking Associations' advanced seasonally adjusted For-Hire Truck Tonnage Index jumped 8.2 percent in November, recovering from a modest 0.3 percent dip in October. 

Year-over-year in November the ATA index was up 5.7 percent. Year-to-date, tonnage in 2016 increased 2.8 percent.

In the holiday week of December 25th, capacity was in short supply as load-to-truck ratios rose driving the national average spot van rate up two cents to $1.73 per mile. This according to load board operator DAT Solutions. 

In the week of December 18th, the Truckstop.com Market Demand Index jumped 19.4 percent from the week before confirming this broad narrative of bumps in volume. 

Will this trend continue into 2017? I think it will moderate over the winter but accelerate in the spring. 

Rail should improve in 2017 

The overall volume of rail traffic in 2016 was weak and is expected to do better in 2017 with growth in manufacturing and an improvement in the price of oil. 

After four consecutive years of incredible intermodal growth in the railroad industry, container and trailer traffic dropped 1.6 percent in 2016, according to data from the Association of American Railroads. For the full year, railroads transported 13.5 million intermodal containers and trailer units, down from 13.7 million in 2015. Carload traffic dropped 8.2 percent to 13.1 million carloads in 2016, which includes the transportation of commodities such as coal, grain, chemicals, petroleum and construction materials. 

Intermodal loadings increased 11.2 percent in December in a year-over-year comparison for the month. For the sake of the rail industry I hope this trend continues. 

At Wagner Logistics 

As I started off with, there is every reason to be optimistic about 2017 as we finish with plenty of momentum. Wagner is planning on adding staff to handle additional work and the team is enthusiastic about the future. 

We have completed many projects on-time and on-budget and have many more in the pipeline. Our systems are best-in-class and our people truly care. 

If there is anything we may do to assist you in warehousing, distribution, and/or transportation don’t hesitate to call. As we say every day, Bring It! 

I wish you all a very happy, healthy, and prosperous New Year.  

Have a great day,

John Wagner Jr. 

 

About Wagner Logistics

Wagner Logistics has been honored 15 years in a row by Inbound Logistics as a Top 100 3PL provider, we offer dedicated warehousing, transportation management, packaging and assembly operations across the United States with over 4,500,000 sq. ft. Current offices include Jacksonville FL, Cleveland OH, Pine Bluff AR, Dallas, TX, Omaha, NE, Clinton, IA, Kalamazoo, MI, Charlotte, NC, Memphis, TN, Edgerton, KS, and Kansas City MO and KS. We provide genuine customer service to our customers and our superior onboarding process will make your customer’s transition seamless. We work tirelessly to find innovative solutions to reduce supply chain costs while increasing your speed-to-market with our award winning technology. 

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