Industry Insights
ATA Tonnage Index increases in July
Maritime shipping lines watching capacity closely
Inside the durable goods orders for July
Warehouse inventories resume seasonal swings, but are still historically lower
ATA Tonnage Index increases in July (09/01/2010)
One of the closely watched metrics for the over-the-road industry is the American Trucking Association's Tonnage Index. After slipping for two consecutive months, the tonnage index was up in July, jumping 1.5 percent. This is a 3.1 percentage point reversal from June statistics. Year-over-year tonnage levels were up 7.4 percent over 2009 volumes for July across the industry which includes all trucking modes--TL, LTL, special units and so on. The index moved slightly less for the YTD metric, up 6.7 percent over the same seven month period in 2009.
Inventory management during the fall season will likely add to the demand for trucking services. As retail chains work to balance inventory levels across their chain stores, rather than conducting significant reorders from source wholesalers or distributors, the trucking industry will come into greater demand this fall. Reduction in inventory carrying costs will continue to be a primary focus for businesses as the economy goes through an uncertain period this fall--uncertain until consumer sentiment and spending improves.
Maritime shipping lines watching capacity closely (09/01/2010)
Several sources have made public comments warning the shipping industry not to repeat the capacity building overreaction as it did after the robust 2005-2006 shipping seasons. That overbuilding created a capacity glut that led to some of the worst conditions for deep sea shipping in decades. Over the past year, container shipping rates have more than doubled, providing the industry with what it calls "necessary" price escalation to boost profits.
Some shipping companies in the segment have posted their first profits in more than 18 months.
Looking forward, the industry is concerned that as much as eight percent of the global shipping capacity may be parked by the end of the year. And, the industry also believes that it could take years to return global demand for shipping capacity to full volumes.
That, plus the pending addition of significant levels of new ships to the global fleet, could create another capacity glut according to several CEOs in the industry. Shippers will likely be eyeing these developments closely in the coming months and into 2011, to understand the impact of capacity on shipping rates.
Inside the durable goods orders for July (09/01/2010)
The report was weaker than analysts had expected in general, but the Durable Goods Order Report for July came with some interesting statistics and implications for the broader economy. On the positive side of the report, overall new orders were up slightly for July, increasing by $600 million to $193 billion in July--a 0.3 percent increase.
But as the onion was peeled back, it unveiled a weaker report that Wall Street latched onto. Excluding the volatile transportation equipment orders, durable goods orders were actually down quite a bit, coming in 3.8 percent lower. Machinery and Capital Goods orders led the report with a 15 percent and 2.8 percent drop respectively.
Analysts used the report to conclude that "statistical evidence for July clearly show that the U.S. economy is decelerating in its pace of growth," according to Daniel J. Meckstroth, chief economist for the Manufacturers Alliance/MAPI. Further conclusions suggest that the recovery is moving at a slower, uneven pace, but could be boosted by an inventory upswing due to low current levels. That would add to the uneven pace of recovery as sudden spikes in activity by segment of the economy help to boost growth in some areas.
Warehouse inventories resume seasonal swings, but are still historically lower (09/01/2010)
Over the past several years, many industry watchers have said that seasonal activity has not been "normal." Many different speculators have offered their interpretation of what was happening to inventory levels, suggesting possible scenarios from the impact of gift cards on seasonal retail trends, online buying, and customers simply not spending as much on Christmas gifts. So, for warehouse inventory building and contracting trends looking more "historic" says quite a bit about the current direction of the retail sector. But if warehouse volumes are still lower than volumes in 2008 after a season of inventory replenishment, that would suggest a more just-in-time inventory scenario playing out through the fall.
Most economists and the business sector are paying close attention to the strategy that retailers are taking on inventory management for the fall. If current trends continue, it appears that retail managers are more focused on going into January without a lot of overstock, and less on concerns of hitting stock-outs through the holiday shopping season. This would carry with it a host of implications from the impact on various modes of transportation--those that would be most popular in a just-in-time environment with unpredictable demand--to the willingness of retailers to discount merchandise to move it through stores if demand is weaker than expected.
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