Consumer prices soar
U.S. consumer prices increased more than expected as booming demand amid a reopening economy pushed against supply constraints, which could fuel financial market fears of a lengthy period of higher inflation.
The consumer price index jumped 0.8 percent last month after rising 0.6 percent in March, says the Labor Department. Excluding the volatile food and energy components, the CPI soared 0.9 percent. The so-called core CPI rose 0.3 percent in March.
Economists had forecast the overall CPI climbing 0.2 percent and the core CPI rising 0.3 percent. With the gas shortage in the east, it’s going to get worse before it gets better.
Disappointing job numbers
Employers added a seasonally adjusted 266,000 jobs in April, the Labor Department said, a sharp slowdown from the previous month and well below the one million jobs economists expected to see. A separate report showed there were 7.4 million unfilled jobs in the U.S.
Job openings reached a record level of 8.1 million at the end of March, reflecting a widening gap between open positions and workers willing and able to take those roles.
Available jobs rose by a seasonally adjusted 600,000 in March to exceed the prior record of 7.6 million set in November 2018, according to the Labor Department. Data from job search site Indeed.com separately showed job posting continued to rise in April, ending the month 24 percent higher than February 2020’s pre-pandemic level.
Under relief bills passed by Congress, unemployed workers are eligible for an additional $300 a week on top of regular state jobless benefits, which average $318 a week, according to the Labor Department. That means the average benefit recipient earns better than the equivalent of working full time at $15 an hour. Those enhanced benefits are available until September, for a maximum of nearly 18 months—about three times longer than most states typically allow.
In a move to get people back to work, ten states are shortening the program and stiffening the job search requirements.
Container traffic surges
Unprecedented levels of container imports continue to flood port markets. The West Coast ports in particular saw increased traffic where 89 percent of TEU (twenty-foot equivalent unit) volume arrived from Asia in March. China alone accounted for 56 percent.
Ongoing U.S. consumer demand for physical goods shows no sign of decreasing. Retailers continue to restock depleted inventories, and the economy is poised to take off this summer. The U.S. Census Bureau reports consumers spent $55b more in retail and food services in March, a 9.8 percent increase from February.
The National Retail Federation says the retail import surge that began in the summer of 2020 is expected to continue during this summer as retailers work to meet increased consumer demand.
Under the current forecast, volume is expected to remain at or above the two million Twenty-Foot Equivalent Unit (TEU) mark for 11 out of 13 months by this August. Before 2020, monthly imports had reached two million TEU only once – in October 2018.
Logistics Managers Index’s historic rise to 74.5
Logistics Managers Index for U.S. logistics-sector activity in April, the second-highest reading in the history of the measure, as transportation and inventory costs rise.
April 2021 Logistics Manager's Index
Demand and costs across all measures saw increases as the Logistics Managers’ Index stepped 2.3 percentage points higher from March to 74.5 percent in April. This was the second highest reading the dataset has logged in its nearly five-year existence.
The LMI is a diffusion index wherein a reading above 50 percent indicates expansion and a reading below 50 percent indicates contraction. The survey is designed to capture the rate of change in areas like transportation, inventory, and warehousing.
The transportation capacity subcomponent of the index increased 2.8 percentage points to 33.2 percent, still “historically low” and firmly in contraction territory. The report described the capacity environment as “one of the tightest transportation markets we have ever measured.”
This has been most evident in the truckload market, where carriers are still rejecting one in every four loads under contract.
A strong consumer, the need for inventory restocking and a severely diminished driver pool remain the catalysts for the tight capacity dynamic. Asked their expectations on the capacity situation one year from now, the respondents’ collective opinion deteriorated 5.6 percentage points from March to 44 percent.
Transportation utilization, up 5.9 points from March to 71.9 percent, remained close to historical highs with transportation prices climbing 2 points to 92.6 percent, the highest level in the past 2.5 years.
Inventory levels did improve in April, up 5.2 points at 66.7 percent. The value was nearly 6 points higher than the historical average and the outlook from respondents calls for continued growth.
Inventory costs climbed 4.6 points to 84.6 percent and warehousing prices increased 2 points to 83.5 percent, both all-time highs.
The sum of the LMI’s three cost components — warehousing prices, inventory costs and transportation prices — was at a record high in April, a dynamic that will likely hold as long as the consumer remains strong enough to absorb at least a good portion of the cost increases.
Popular metrics tracking the US manufacturing industry indicated strong growth in April. The Institute for Supply Management's purchasing managers' index dipped 4 points to 60.7, while IHS Markit's own gauge rose to a record high of 60.5.
The April reports further support the industry's resilience throughout the pandemic, but underlying trends point to growing risks at American factories. Supply-chain disruptions and raw-material shortages plagued manufacturers throughout the month as the broader economy rebounded. New orders accelerated even further amid stronger client demand, leading backlogs to climb at their second-fastest rate since IHS Markit began collecting data.
At the same time, gauges of manufacturing-industry employment slowed last month, leaving firms to address burgeoning order books with inadequate headcounts. The hiring woes, coupled with historic supply chain pressures, dragged IHS Markit's measure of business confidence to a three-month low.
The labor-force shortfall mirrors dynamics seen throughout the service industry as well. Businesses from restaurants to rideshare companies have reported difficulty in hiring as the economic recovery ramps up. Payroll growth is expected to near 1 million new jobs in April, but worker shortages could curb the labor market's rebound sooner than economists expected.
Transportation woes for shippers
The transportation capacity to haul all available freight simply isn’t available as the demand rises. This situation is expected to last through the remainder of the year.
There is simply more freight available than drivers to haul it.
Manufacturers and retailers including General Mills Inc., Rubbermaid-owner Newell Brands Inc. and Bed Bath & Beyond Inc. have pointed in recent quarterly earnings reports to rising transport costs and tight capacity as operational hurdles as they seek to restock inventories and meet strong consumer demand.
Trucking fleets have been stepping up equipment orders and raising driver pay as they compete for labor with industries such as construction. But those efforts still have not caught up with demand as the freight market roars back in an expanding economy.
The most recent Cass Information Systems Inc. seasonally adjusted index for U.S. freight demand rose 3.4 percent from February to March while the separate measure for freight expenditures rose nearly twice as fast, at 6.5 percent, signaling rapid growth in shipping costs.
Current truck market
In the week ending May 9th, DAT Solutions reports that the International Roadcheck Week typically brings a drop in truck posts on the DAT One load board network. Many carriers take time off, while others are delayed by the inspections. Normally the drop is around 9 percent, but last week, truck posts fell 17 percent. Reefer carriers typically take time off in greater numbers compared to dry van and flatbed carriers. They recorded 20 percent fewer equipment posts last week. National average rates rose for each equipment type, with reefer and flatbed averages above the $3 mark.
National average spot rates for dry vans are averaging $2.70 per mile so far in May.
$2.40 in February, $2.65 in March, and $2.59 in April. See the trend?
Railroad volumes surge
The Association of American Railroads (AAR) today reported U.S. rail traffic for the week ending May 8, 2021. For this week, total U.S. weekly rail traffic was 523,309 carloads and intermodal units, up 26.9 percent compared with the same week last year.
Total carloads for the week ending May 8 were up 27.6 percent compared with the same week in 2020, while U.S. weekly intermodal volume was up 26.3 percent compared to 2020.
For the first 18 weeks of 2021, U.S. railroads reported cumulative volume of 4,098,956 carloads, up 4 percent from the same point last year; and 5,080,788 intermodal units, up 18.1 percent from last year. Total combined U.S. traffic for the first 18 weeks of 2021 was 9,179,744 carloads and intermodal units, an increase of 11.3 percent compared to last year.
At Wagner Logistics
The robots are running at Wagner. It has been a long project, but it is great to see the culmination of so much effort by the IT and Solutions teams. This capability will greatly enhance Wagner’s productivity and accuracy in meeting the needs of our fulfillment customers.
Wagner’s transportation teams are successfully moving our customers freight in this difficult market.
As Wagner continues to work its many projects, we would love to work with you. If you are issuing a transportation RFP or have a distribution/fulfillment project, let’s schedule a call.
We are celebrating our 75th year of history of service to our customers and would really appreciate the opportunity to collaborate with you.
As we say every day, Bring it!
Have a great day!
John Wagner Jr.
About Wagner Logistics
Wagner Logistics was founded in 1946 on the principle that every customer is a big deal and that continues to pervade our mentality, producing a superior customer experience. The company began in trucking and remains dynamic offering top-notch transportation, dedicated warehousing and robust fulfillment services. We strive to produce innovative solutions, in addition to our superior onboarding process which makes transitions seamless, and have been honored 20 years in a row by Inbound Logistics as a Top 100 3PL. Our customers drive our entry into new geographic markets, technological advances and ever-changing distribution challenges. Where do you want to be? Wagner says, Bring It!