Supply Chain Blog

New Year optimism continues as the economy expands


Dear Friends,

The economy is rolling so far this year, so what are consumers thinking? 

The preliminary reading of the University of Michigan's consumer sentiment for the United States fell to 95.7 in February of 2017 from a 13-year high of 98.5 in December. 

Likewise, The Conference Board Consumer Confidence Index had increased in December, fell back in January. The Conference Board believes the decline in confidence was driven solely by a less optimistic outlook for business conditions, jobs and consumers’ income prospects. Consumers’ assessment of current conditions, on the other hand, improved in January. Despite the retreat in confidence, consumers remain confident that the economy will continue to expand in the coming months. 

With the promise from Washington that there are lower taxes, an increased focus on U.S. manufacturing and infrastructure spending on the horizon, coupled with a rise in consumers 401K accounts, the outlook is positive for 2017. 

All of this is positive news, expect the Federal Reserve plans to move aggressively with a series of small interest rate increases this year. 

The Conference Board’s Leading Economic Index rises 

The Conference Board's Leading Economic Index (LEI) improved by 0.6 percent in January to 125.5, following a 0.5 percent increase in December and a 0.2 percent increase in November. The sharp increase leads to a conclusion that the economy will accelerate in the first three months of the year.  

The Commerce Department releases e-commerce data 

Commerce reported that e-commerce sales increased in both the fourth quarter of 2016 and for all of last year rising 1.9 percent in the last three months of the year. Fourth quarter 2016 e-commerce rose 14.3 percent from the same period in 2015. 

Total e-commerce for 2016 was at $394.9 billion, an increase of 15.1 percent from 2015, while total retail sales in 2016 increased 2.9 percent. E-commerce sales in 2016 accounted for 8.1 percent of total sales, up from 7.3 percent in 2015. 

Home building stalls while existing homes sell at the highest level in a decade 

The Commerce Department reports housing starts fell 2.6 percent in January. Overall permits issued, which indicates future building levels, increased 4.6 percent in January to 1.285 million units, its highest level in more than a year. Single-family permits fell 2.7 percent to 808,000 units, while multifamily permits increased 19.8 percent to 477,000 units. 

While home building stalled, the National Association of Realtors (NAR) reported that existing home sales increased 3.3 percent from December to a seasonally adjusted annual rate of 5.69 million last month. Inventory rose 2.4 percent at the end of January from the end of December, when supply hit the lowest level since NAR began tracking all types of supply in 1999. Housing inventory is down 7.1 percent from 2016, which is a more reliable measure because December is historically a slow time for buyers to put homes on the market. At the current sales pace, it would take 3.6 months to sell out the supply of existing homes on the market. 

New homes translate into furniture, appliances, electronics and other materials, this is a boost to transportation providers. 

The Fed reports higher production 

The Federal Reserve reports that manufacturers boosted production by 0.2 percent in January after a 0.3 percent increase in December. What makes this increase remarkable is that auto production fell 2.9 percent in January. 

Business investment is getting better as machinery production bumped up 0.9 percent in January after falling 1.0 percent in December. Compared with January 2016, output was up 0.5 percent on the heels of an annual gain of 0.3 percent in 2016. There is still a lot of room for improvement here. 

January retail sales surprise 

Many retailers had success in January as total sales rose 0.4 percent despite a 1.4 percent decrease in auto sales, according to the Census Bureau. Excluding autos, sales were up 0.8 percent. Compared with January 2016, sales surged 5.6 percent, the largest year-over-year increase since March 2012.  On a year-over-year basis, department store sales contracted 3.2 percent, but non-store retailers, including on-line sales, jumped 12 percent. 

Excluding both autos and gasoline, retail sales were up 0.7 percent last month, which was the strongest reading since last April.  

The National Retail Federation (NRF) is forecasting 2017 retail sales excluding automobiles, gasoline stations and restaurants, an annual gain between 3.7 and 4.2 percent. With on-line and other non-store/on-line sales to head up between 8 and 12 percent. 

Consumer spending accounts for approximately two-thirds of all economic activity, this is very good news for the U.S. logistics sector. 

The Cass Freight Index shows January growth 

The Cass Freight Index is considered to be the most accurate barometer of freight volumes and market conditions. January shipments were up 3.2 percent annually at 1.005 and down 6.4 percent compared to December. This reading follows a 3.5 percent annual gain in December, a 0.3 November decline and a 2.7 percent gain in October, which marks the first time it headed up in the previous 20 months. 

January freight spend increased at 2.268 and headed up 4.3 percent annually, while declining 0.3 percent compared to December. This is the first time expenditures have been positive in 22 months. 

DAT shows truckload spot pricing fell in January 

Truckload carriers were coming off a favorable December and experienced the seasonal post-holiday downturn in freight. The DAT North American Freight Index fell 2.5 percent in January, following an 8 percent December increase, ending a six-month stretch of gains. Even though the post-holiday drop-off remained in effect, January truckload spot market activity was up 56 percent annually.  

DAT said that spot, van, refrigerated and flatbed rates in January saw annual gains, but they were slowed by increases in capacity from contract carriers entering the spot market, specifically on high-traffic lanes, which, in turn, drove down pricing. 

The 2017 January DAT Freight Index closed at a high not seen since January 2014 or January 2015. 

DAT reports that in the week ending February 18th, spot rates stabilized with load-to-truck ratios up but not enough to move pricing upwards. The national average van spot rate was $1.62 per mile for the week. 

Railroads show signs of improvement 

The Association of American Railroads (AAR) reported that U.S. rail traffic for the week ending February 18 was up 6.8 percent from the same week a year ago. Volume for the week was 531,123 carloads and intermodal units. 

Total carloads were 263,620 carloads, up 7.6 percent compared with the same week in 2016, while weekly intermodal volume was 267,503 containers and trailers, up 6 percent compared to 2016. 

Seven of the 10 carload commodity groups posted an increase compared with the same week in 2016. They included coal, up 18.6 percent to 90,927 carloads; nonmetallic minerals, up 11.1 percent to 33,732 carloads; and miscellaneous carloads, up 10.6 percent to 9,292 carloads. Commodity groups that posted decreases compared with the same week in 2016 were motor vehicles and parts, down 10.3 percent to 17,590 carloads; petroleum and petroleum products, down 3.7 percent to 9,878 carloads; and forest products, down 3.2 percent to 10,113 carloads. 

For the first 7 weeks of 2017, U.S. railroads reported a 5.0 percent improvement in carloads and 0.5 percent improvement in intermodal. Overall total volume year-to-date compared to the same period in 2016 is up 2.7 percent. 

Meanwhile, back at Wagner….

At Wagner Logistics we are continuing to carry over the momentum we enjoyed from 2016. New distribution center business is being added and our transportation group has landed new customers and additional lanes from existing customers. 

Wagner’s IT group is developing several tablet based solutions to speed up processes on our docks, I’m very excited about the potential.  

If you are considering an RFP process for transportation or distribution center operations please give me a call. We have been in business for 71 years, bring us your challenges. As we say everyday, Bring It!

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. 

Add comment

Security code

The Wagner Team

Wagner's seasoned logistics pros competitively engage in helping your business work smarter. We do it through advantages of structure, scales and integration.

Warehouse OperationsWhat Bring It Means to Us

Whatever your supply chain challenges are, Wagner can't wait to take them on.