Supply Chain Blog

Consumer confidence soars, freight market continues to improve

 

Dear Friends,

I've been digesting all the information I learned at the International Warehouse Logistics Association’s (IWLA) annual conference last week. The state of industry is good and growing. A study on the economic impact of the 3PL industry was commissioned and PWC will publish its findings next month.
 
The most surprising element I learned in looking at the preliminary data was the indirect impact purchases of supplies from their vendors that rippled through their companies supply chains. Another surprise is that more jobs were created in e-commerce in 2015 than in retail. It’s a fascinating time to be in the warehouse logistics business.
 
Let’s start our review of the current economic data, so far it still looks good for the U.S. economy with consumers feeling downright cheery.
 
The Conference Board’s March index on consumer confidence grew to a reading of 125.6 from 116.1 in February. Americans are more optimistic about the economy with confidence reaching its highest level in 16 years. What’s surprising to me is that with all of the negative press the current administration is getting, consumers feel good about their future jobs and growing pay.
 
In February the Conference Boards’ Leading Economic Index (LEI) rose 0.6 percent gain, its highest mark in 10 years.
 
The LEI is made up of ten components which include the new-orders gauge of a manufacturing purchasing manager’s index, the interest rate spread between the 10-year Treasury and federal-funds rate.
 
Manufacturing improves for the sixth straight month
 
The Federal Reserve reported the total output from the nation’s factories, mines and utilities was unchanged in February. The nation’s manufacturing sector improved in February for the sixth straight month, posting a 0.5 percent jump from January and it came in 1.2 percent higher than the same time a year earlier. Mining leapt up 2.7 percent while warm weather negatively affected utilities which fell 5.7 percent.
 
Capacity utilization for the industrial sector declined 0.1 percentage point in February to 75.4 percent meaning there is plenty of capacity for growth.
 
Durable goods orders increase
 
The Commerce Department reports that durable goods orders (products intended to last three years or more) jumped in February by 1.7 percent better than January which was revised to a 2.3 percent increase.
 
Transportation orders led the field up 4.3 percent. Without the new transportation equipment orders, the increase was up 0.4 percent for the sixth straight month gain.
 
The only negative news is that an indicator of business investment, nondefense capital goods without aircraft, slipped down 0.1 percent in February. It’s important to keep in mind that this measure is still up 9.1 percent over the previous three month period.
 
Housing stumbles without inventory
 
New home sales jumped 6.1 percent in February according to the Commerce Department for a seven year high while a low inventory of available existing homes hurt sales. 

Slightly higher interest rates don’t appear to be slowing down home sales. A year ago in February, sales increased 12.8 percent for new homes which account for about 10 percent of all home sales.
 
The National Association of Realtors reported that existing homes (includes townhomes and condos) fell 3.7 percent in February. Regardless, February sales pace is still 5.4 percent better than the same month last year. January’s sales hit a ten year high.
 
February retail sales slow
 
Retail sales in the U.S. eked out a small gain in February which is attributed to the slow turnaround for tax refunds.  Retailers and restaurants sales were up 0.1 percent according to the Commerce Department.
 
Taking out auto sales and parts, sales were up 0.2 percent from January to February. The January retail sales numbers were revised up from the originally reported 0.4 percent to 0.6 percent.
 
Trucking keeps on rolling
 
In the week of March 19-25, DAT Solutions reports that the freight that had been backed up due to winter storms was moved and business is back to normal levels with enough capacity to keep rates from rising. The average national dry van load paid $1.63 per mile, down a penny. This is attributed also to lower fuel surcharges in effect. The national flatbed rate rose a penny per mile to $2.02.
 
The American Trucking Associations’ seasonally-adjusted truck tonnage index rose 7.2 percent in February from a month earlier. At 144, the index was up 8.6 percent from February of 2015 and it jumped ahead of the previous all-time high of 134.7 in December.
 
The truckload market seems to be evolving as carriers deal with governmental regulations, higher shipper expectations and a nagging driver shortage. Some larger carriers are shifting company-owned trucks to dedicated contract carriage and other regional freight routes to gain reliable utilization.
 
Swift Transportation has expanded its service offerings to both customers and drivers with expedited team service. The new Swift Express routing option allows drivers to haul loads within a close range of their homes.
 
LTL carriers are seeing more freight as Old Dominion Freight Line Inc. and Saia Inc. reporting increased volumes. The large LTL carriers are focused on their ops ratios to drive profit and the smaller carriers are charging hard for revenue growth. Everyone is trying to find a better mousetrap to deal with the influence of e-commerce.
 
For the first time in history, the three largest LTL companies are all non-union. FedEx Freight is no.1, XPO Logistics is no. 2, and no. 3 is ODFL.
 
Slow growth in railroad
 
The Association of American Railroads (AAR) reported U.S. rail traffic for the week ending March 18th increased 2.4 percent above the same week last year.
 

Total carloads for the week was up 4.6 percent compared while U.S. weekly intermodal increased 0.3 percent compared to 2016. 
 
Mexican railroader Ferromex has made an offer to buy the Florida East Coast Railroad as its first U.S. acquisition. Given the rancor in Washington DC over NAFTA we will be watching closely to see how this plays out.
 
At Wagner Logistics
 
I’m happy to report that Wagner is wrapping up a solid quarter and we continue to show good performance reports with customers and in safety compliance. Wagner’s transportation group has seen growth in business and that’s a testament to the customer focused people who truly have the attitude that customer services isn’t a department, it’s a mindset.
 
Our distribution centers are all operating at a high level and we are excited about the months to come.
 
Considering a change in your distribution network? Give me a call as we have been in business for 71 years and want to hear about 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. 

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