Supply Chain Blog

Will August numbers eclipse July?

Dear Friends,

 

As we approach mid-August, children are getting ready to return to school and we await the total solar eclipse on the 21st in Kansas City. Business is showing a continuance of our positive trends as we are awarded significant new business. 

The economic tailwinds are blowing in the right direction, let’s look at the numbers. 

The job market grows & wages tick up 

The Bureau of Labor Statistics reported that a robust 209,000 net jobs were added in July, while June’s figure was revised up by 9,000 to 231,000 jobs. May’s gain was revised down from 152,000 to 145,000 for a combined net gain of 2,000 for just the previous two months. 

The unemployment rate fell from 4.4 percent to 4.3 percent in June as both employment and labor force participation rates showed strong gains. 

The labor force participation rate, a measure of all the workers who could be working that either are working or looking for work, rose to 62.9 percent in July from 62.8 percent in June. The higher number means people staying at home are coming back into the work force. 

Service sector jobs were up by 183,000 compared with June’s 162,000 gain. Included in this service sector are transportation and warehousing jobs gaining 900 jobs in July after a big boost of 6,100 jobs in June. For-hire trucking jobs increased by 400 in July after falling by 2,000 in June. 

As one would expect the tightening job market has begun to raise wages. Average hourly earnings last month rose 2.5 percent from a year earlier, per the Labor Department. 

U.S. Trade deficit narrows in June with export growth 

The trade gap fell 5.9 percent to $43.6 billion, its lowest level since last October. Exports of goods and services increased 1.2 percent to $194.4 billion, the highest level since December 2014. 

The decline in the trade deficit in June was the combination of a $2.4 billion increase in exports of goods and services and a $396 million decline in imports. 

Exports of capital goods, agricultural products, automobiles/parts, industrial supplies and materials all posted gains during the month with consumer goods declining by $324 million. 

Factory Orders Hit 8-Month High 

New factory orders in the U.S. during June rebounded 3 percent from the month before, following two monthly declines. It was the largest monthly gain since October. 

The Commerce Department said this was due to a revised 6.4 percent increase in orders for durable goods, those designed to last at least three years, following May’s flat growth. Transportation orders spiked 19 percent while nondurable goods orders fell by 0.3 percent in June. We should remember that transportation orders are historically volatile. 

Orders for non-defense capital goods excluding aircraft were unchanged in June and orders for core capital goods rose 0.8 percent in May. 

The July purchasing mangers’ index (PMI), which measures activity at factories, slipped to 56.3 from 57.8 in June. Any reading above 50 corresponds to a growing factory base so July’s reading remains in very solid growth territory. 

Solid service sector numbers 

Coming off the lofty levels reached in June, non-manufacturing activity in July was still solid, per data issued in the Institute for Supply Management’s (ISM) Non-Manufacturing Report on Business. 

The index ISM uses to measure non-manufacturing growth, known as the NMI, declined 3.5 percent to 53.9 (a reading above 50 indicates growth) in July, coming off June’s 57.4, the highest level since February 2015. The NMI grew for the 91st consecutive month and the June NMI is 2 percent below the 12-month average of 55.9. 

The report indicates inventories fell 1 percent to 56.5, growing for the fourth straight month. 

Trucking cools off 

After a crazy busy freight market in June and early July, volumes returned to a less frantic pace at the end of last month. In the week ending July 29th a higher-than-normal surge of volume on the spot market occurred according to DAT Solutions. There were no substantial rate increases indicating capacity was available to handle it.

The number of available loads increased 2 percent while truck posts edged down 2 percent compared to the previous week. Typically, July is a month when spot truckload freight activity begins to decline.

National average load-to-truck ratios held steady with the van load to truck ratio at 5.3 to 1, up from 4.8 to 1 the previous week. Flatbeds remained at 36.1 to 1 and reefers held at 8.5 to 1.

In the van market, the top 100 van lanes set all-time records for volumes last week. Nationally, load posts increased 6 percent and posted truck capacity decreased 2 percent, but rates did not respond with the national average van rate falling 2 cents to $1.79 per mile, down from $1.90 per mile for the week ending July 8. (All rates include fuel surcharges)

Rail results mixed 

U.S. rail carload and intermodal volumes were mixed in July according to the Association of American Railroads (AAR). 

Carloads fell 0.6 percent and the AAR noted that 9 of the 20 carload commodities it tracks were up annually, including: crushed stone, sand & gravel, up 15 percent; coal, up 4 percent; and chemicals, up 1.5 percent. Commodities that saw declines in July 2017 from July 2016 included: grain, down 14 percent; motor vehicles & parts, down 12.9 percent; and petroleum & petroleum products, down 15.4 percent. 

The AAR pointed out than when removing coal, carloads were down 2.8 percent, or 19,176 carloads, annually, and when excluding coal and grain, carloads were off 1 percent, or 5,851 carloads. 

On the intermodal side, containers and trailers rose 5.6 percent, or 55,997 units, to 1,058,354 from July 2016 to July 2017. Intermodal has shown consistent growth over the last few months. 

At Wagner Logistics 

Wagner completed a solid July and is off to the races in August with strong transportation demand. The Wagner team continues to perform well with carrier and lane management while moving customer loads on time and on budget. 

On the warehousing side of the business we continue to see growth as we recently were awarded a significant 500,000 square foot opportunity in the eastern U.S. and are looking forward with planning to go live in October. 

Our fulfillment operation is making progress in systems improvements as we plan for this fall’s holiday season kicking off with Black Friday followed by Cyber Monday.  

As you execute plans, please let me know if you are planning to add warehouses or seek help in moving freight. Wagner has been in business for 70+ years and we 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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