Shipping is a measure of the real economy. And it isn’t doing very well, apparently.
September is in the early phase of the make-or-break holiday shipping season. Shipments usually increase from August to September. They did this year too. The number of shipments in September inched up 1.7% from August, according to the Cass Freight Index.
But the index was down 1.5% from an already lousy September last year, when shipments had fallen from the prior month, instead of rising. And so, in terms of the number of shipments, it was the worst September since 2010.
It has been crummy all year: With the exception of January and February, the shipping volume has been lower year-over-year every month!
The index is broad. It tracks data from shippers, no matter what carrier they choose, whether truck, rail, or air, and includes carriers like FedEx and UPS.
Evidence keeps piling up in the most unpleasant manner that something isn’t quite right in the real economy. The world is now in an inexplicable slowdown – “inexplicable” for central bankers who’ve cut interest rates to zero or below zero years ago, and who’re still dousing some economies with QE even as governments are running up big deficits. And yet, despite seven years of this huge monetary and fiscal stimulus, the global economy is deteriorating.
In this scenario, the US has been the “cleanest dirty shirt,” as it is now referred to, after the term “locomotive” fell for obvious reasons into disuse. But the freight data throws more sticky dirt on that shirt.
For a historical perspective of just how crummy things have become, and how we’re made to think that they’re actually pretty good, after all the Fed’s gyrations: the number of shipments in September was down 13% from the levels in September 2004 and 2006.
But unlike the number of shipments that are in morose decline, there is real growth in the money spent on shipments. Since that peak September 2004, the expenditure index, which tracks how much shippers are paying carriers to get these shipments to their destination, has soared 48%.
That’s one of the big benefits of inflation for corporate America. It allows companies to keep up the charade of sales growth.
Revenues for carriers look great as long as they can raise prices, even if they transport less freight. But now they’re having a hard time raising prices: the expenditure index fell 6.6% in September from a year ago, the lowest for a September since 2012:
Trucking companies, according to Cass, “are holding rate increases down,” given the mix of capacity and demand, and rate increases are expected to remain “modest” for the rest of the year. But very helpfully, FedEx and UPS already announced rate increases effective November just in time for the holiday shipping season.
So if the index for shipping volume remains weak for the remainder of the holiday shipping season, at least the index for shipping expenditures might rise. And money is ultimately what counts for GDP purposes and quarterly earnings reports.
To explain the malaise that shipping is experiencing, Cass points at the Institute for Supply Management’s September PMI, which was dragged down by, among others, Production and New Orders. And Cass points at business inventories. They have soared since late last year, as over-optimistic orders outpaced the tough reality of sales.
Shipping companies benefit from that kind of inventory buildup. But when inventories reach levels where businesses begin to fret about being overstocked and start slashing orders to bring inventories down, shipping feels the pain.
Now wholesales declined again, wholesale inventories rose further, and the crucial inventory-to-sales ratio has reached Lehman-moment levels. Read… Last Time that Ratio Soared like this, Stocks Crashed
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My Son-in-Law is a truck driver. He told me he has to beware of loads that are picked up late in the week, with delivery to occur early the next week. This ties up his truck with a load over the weekend. The broker will show he is unavailable over the weekend and he can’t be placed on the books as available until he has dropped his load off.
That shouldn’t be true. As long as your son is empty in a particular state near his next load, he should be able to get booked for the reload. Unless he works for a very large trucking company; then he probably has a bad dispatcher.
Guess again. Article posted on Zero Hedge backs him up. 1/3 of all containers being shipped back to China from Longport and L A terminals are empty! They are being sent back to be scrapped and will surpass the amount sent back during the financial crisis by the end of this month! usually they are filled with scrap material. Longport stated they would break a record this year until WSJ did research last month and uncovered the truth behind it. WMT earnings should give you a reason also from yesterday. Most intermodal traffic increase on rails is now bogus
Just keep an eye on commodities in the markets that are too big to manipulate.
Commodities are the raw materials that real products are made of.
Global prices, based on global trade.
Anyway, how is the global consumer these days?
1) The once wealthy Western consumer has had all their high paying jobs off-shored. As a stop gap solution they were allowed to carry on consuming through debt. They are now maxed out on debt.
2) Japanese consumers have been living in a stagnant economy for decades.
3) Chinese and Eastern consumers were always poorly paid and with nonexistent welfare states are always saving for a rainy day. Western demand slumped in 2008 and the debt fuelled stop gap has now come to an end.
4) The Middle Eastern consumers are now too busy fighting each other to think about consuming anything and are just concerned with saying alive.
5) South American and African consumers are busy struggling with economies that are disintegrating fast.
Oh dear.
100+
We have accidentally consumed the future.
We have deliberately consumed the future.
There – fixed it for you!
“the number of shipments in September was down 13% from the levels in September 2004 and 2006.”
So Wolf, do your shipping stats include oil? I’m only asking because the US Bureau of Transportation provides information titled: “GROWTH IN THE NATION’S FREIGHT SHIPMENTS – HIGHLIGHTS”. Oil shipments are included in the Bureau’s statistics. Oil shipments, since 2004, are down approximately 32%. Perhaps the drop in oil shipments could account for some of the overall freight drop. Now that oil production in the US has plunged, oil shipments from other countries could pick up. However, a pick up in oil shipments to the US will not necessarily be an indication that the US economy is picking up steam.
Good question. I should have clarified that. The answer is: no, it does not include commodities, such as oil, wheat, coal, etc.
The data is based on “$26 billion in freight transactions processed by Cass annually on behalf of its client base of hundreds of large shippers. These companies represent a broad sampling of industries including consumer packaged goods, food, automotive, chemical, OEM, retail, and heavy equipment.
The fact that this index moves very seasonally with its peak during the holiday shipping season shows that it’s heavily influenced by retail.
Good answer.
I own a fleet of 15 trucks that go on the road delivering all kinds of freight and I can tell you it’s extremely slow. This should be our busiest seasons for 4th quarter but it feels like it’s January. With the price of diesel being low and low amounts of freight moving, the rates for all truck loads have dropped significantly. Meanwhile our insurance payments increase every year.
I’ve spoken to numerous freight brokers also and they say the same. We handle dry freight and we felt the slow around the beginning of the summer. I have a reefer freight friend who’s said it’s been slowing down since middle of last year.
I was in my local closeout store yesterday, and they are fully stocked with holiday items for Halloween, Thanksgiving, and Christmas, all at once. Usually items show up close to or after the holiday. Prices were higher than I would pay at a discount store.
I go to the local dollar store about once a month just to see if there is anything worth buying. They are always fully stocked and seem to do a rather brisk business.
I usually spend about $10 and get stuff that would cost $25 at Walmart and $50 or more at other retailers.
Last month, I got some greeting cards – 2 for $1. Original retail prices were $2.99 – $3.99.
I personally avoid to buy Chinese products as much as possible and feel that same happening in my circle of friends. Everybody I know is buying less but better quality. So for however it is small contribution for reduced freight shipments from China I am proud of that. We have to make all of it here and regardless of how much you pay workers money is always spent and home, in other words Government pockets. So it is win-win situation and everybody is happy.
Blame the problems on the jerks who run Google.
The internet is supposed to decentralize everything and in a way it has done so in many areas. That being said there should be a massive amount of small businesses with all kinds of trade skills be created here in the US. That is not happening and blame it squarely on Google. They and the supposed page rank system screws the little guy over and over again and again and gives scam artists and those who can fake their system of ranking all the monies.
There should be thousands upon thousands of new food companies, new clothing vendors and new custom creations products of all types from furniture to computers to food but they don’t exit because THEY CANNOT GET ORGANIC PUBLICITY LIKE THEY SHOULD.
Blame the coming depression and destruction of the middle class on a few twits in silicon valley.
Google is an advertising company. If you pay them they will display and distribute your ads, if you don’t pay them, you get a free listing all the way down the line.
Yup.
And to boot if you are running Android as a phone OS … guess what (who) the product really is … !
You!
Regards,
Cooter
“I personally avoid to buy Chinese products as much as possible and feel that same happening in my circle of friends.”
Cell phones, tablets, laptops, entertainment system components in all categories, electronics of all types, clothes, etc., etc., all made in China. Besides food, houses, and (most parts in) automobiles, what isn’t made in China? I’m asking because I, too, would like to avoid purchasing made in China products if at all possible. My question is, “How?”
One of the ways to buy more “American” is to spend more on services, like restaurants, or hairdressers, and less on stuff. I found a company (Fresh Produce) that sells women’s clothes all made in America. I buy more of what I need from them.
The trick is to get by on things one really needs and skip all the other stuff. You know what we cook with at home? A Cuisinart 8 quart stock pot (with pasta insert and steamer tray), my fathers mothers Griswold #9, my mothers mothers Le Creuset dutch oven, a small cast iron skillet (lodge), a griddle (lodge), and some baking pans (USA Pan). We make coffee in a Bialetti stove top (plug in units fail and are lower quality – I replace gaskets every couple years and have my morning brew down to 10 minutes, two tablespoons, and black as tar).
I ain’t wore out my hand-me-down rifles/pistols and I think my newer gun leather is going to last longer than me. I still have my old mans knives, including a buck knife which is one of our regular kitchen tools (gift when I was 9 – still have the original leather).
Want to know a secret? Get an Arkansas tri-stone and a buck knife, and use those buggers in the kitchen for everything that works. It is amazing what one can do without a gaggle of fancy knives. And you will NOT wear it out, even if you sharpen once a week, which isn’t necessary if you have a proper leather strap around to straighten the blade edge (I used my gun belt – just tie over your boot toe and hold the end and don’t cut yourself) .
I regularly shop quality and get 5 years (minimum) out of electronics such as cell phones (new batteries required every so often), laptops, PCs, and that sort of thing. They don’t need replacement like they used to back in the day when a 486 could open a spread sheet in a snap where that 386 gave you enough time to make coffee.
These days I find myself spending all my money on food, quality consumables (e.g. Alterna hemp conditioner/shampoo), clothing (wool and cotton), and things of that nature. Right now I am in the market for a bodark (Osage Orange) hiking pole which will again last a life time once I make my purchase.
People these days are addicted to junk that has no purpose in life but wasting space in a landfill. Living without cheap import stuff is easy, one just has to have the proper lifestyle. I lived the old (modern) one, and I am much happier these days pinching a buffalo nickle til it shits – but I do drop cash for quality items I can still depreciate when I am 80!
If you don’t know how, learn to live like your grandparents, just give them a call and ask. :-)
Regards,
Cooter
mines wagner brand from my grand parents who bought them in the 20,s 3 case knives over 60 years old and two 3leged pots that came from south carolina in 1853 when my pepole moved here use them every day thhe rest of your advice is right on !!!
After spending $600 on three Chinese-made heaters that died after 12 months (and finding that the repair parts weren’t available), as well as buying a silk blouse made in China that lost most of its buttons on the first wearing, the several electric can openers that died after three months, and the microwave oven that turned itself on in the middle of the night, I vowed to boycott Chinese products whenever possible.
You only need one of each electronic or digital item on your list (and they don’t have to be new either). As for clothes, I only buy at thrift shops. I already own one house and one car. As for food and pet food, I will never buy any of it if comes from China and I also avoid other imported foods as well. Buying local in season is the way to go. I’m sure than a good deal of America feels the same way.
Can shipments be morose? Lackluster maybe.
On the other hand, who isn’t feeling morose these days. Animate, inanimate, what the heck.
The 0.1% are not feeling morose. The Fed keeps pumping money for their benefit.
I am – not so sure; pun not intended. Rumor has it that the 0.1% are very anxious. I can sympathize, what’s worse; to fall from a 1000 feet, or just 10? :)
Mary,
Yup, kind of a stretched-past-the-breaking-point metaphor. I took it out of the title. But a “morose decline” survived the edit :-]
I can comment on this as I’m also in the industry. I work for a medium sized trucking company based in Western Michigan. We consolidate and ship refrigerated LTL (less-than-truckload) moves for Walmarts from the upper Midwest to the lower 48. I’m the guy who makes money making people fat (we ship mainly donuts and frozen prepackaged food). We’re lucky as our particular part of the industry is fairly recession proof and we’re in a great area for what we do.
Industry wise there has been a fairly dramatic slow down. I can’t comment to much on the dry side of things but finding spare capacity has gotten much easier compared to a year ago and it is much easier to negotiate a better rate. I think this is happening from a few points I’ll outline below.
1. Obviously the decline of shipments is lowering the rates.
2. There have been a ton of layoffs in the oil fields which leaves those truckers adding to the nationwide capacity.
3. The drought in California and the west coast has caused a tremendous amount of capacity to be freed up from carriers who would be puling produce out of there.
4. Large contract carriers have locked in their contracts which slows down the available freight for the smaller guys.
I’m sure there are more reasons but those seem to be the main points from my little corner. I’m very happy where I’m at but if you don’t have a customer base locked down in this industry you better hurry before the window closes which seems to be just around the corner.
Surprised nobody has brought up the driver shortage issue. The average age of most truck drivers is over 40 and the millenial generation doesn’t see this profession as very attractive or high paying (it isn’t unless you have experience and are getting more miles, or you are an owner operator) Freight companies are begging for drivers right now…..a solution to this and freight shipping in general is more outside the box concepts like Elon Musk’s hyperloop or high speed rail. Where is the R&D in transportation logistics these days??
Wolf, you’re really making strides in the freight handling community. I know I’m promoting this site to everyone I know. Was a time here when I felt like the Lone Ranger.?
Thanks. The comments by insiders are awesome!
Agree Wolf. Folks with real industry experience (regardless of where they come from) add so much value and make WolfStreet a daily visit for me (when I am not on fire at work).
I don’t truck, but I might have convinced my local Public Radio up here in AK to let me do a music show and Roger Miller will be on my play list if I have a vote!
Regards,
Cooter
Industry Trends – Spot Market Industry Trends – Van Industry Trends – Flatbed Industry Trends – Reefer Industry Trends – Fuel Prices
INDUSTRY TRENDS WEEK MONTH YEAR
Oct 4 – 10 vs.
Sep 27 – Oct 3 Sep 2015 vs.
Aug 2015 Sep 2015 vs.
Sep 2014
Spot Market Loads -11% -0.8% -38%
Spot Market Capacity +3.7% +2.6% +25%
Van Load-To-Truck -19% +0.2% -42%
Van Rates (Spot) -0.6% -0.6% -14%
Flatbed Load-To-Truck -7.9% -7.5% -66%
Flatbed Rates (Spot) -1.0% -1.5% -15%
Reefer Load-To-Truck -15% -1.2% -48%
Reefer Rates (Spot) -2.5% -1.0% -13%
Fuel Prices +0.6% -3.5% -34%
Rates Slip as Demand Falls for All Trailers
Last update: 10/13/2015 – Next update: 10/20/2015
Load Volume Drops 11%
Oct 4 – 10 – Load posts fell off after a surge at the end of September. Van spot market rates slipped 1¢, while reefer rates fell 5¢ as a national average. Flatbed rates were down 2¢, including a 1¢ drop in the average fuel surcharge.
The chart at left depicts national average spot market rates, including fuel surcharges, for the past four weeks. Rates are derived from DAT RateView.
Learn about RateView› Get Trendlines Updates›
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“Load volume drops 11%” … good grief!
Demand is down. Freight movement is down. Any questions on this “Cause and Effect” relationship.
The one thing stat makers keep forgetting, is people have no money. Look at earning increases. Where are they? While healthcare costs keep rising, the gummint tells us we have no inflation. Working men got 1-2% gov workers 1%. Healthcare costs rising fasted rate in years…
Where do they get this hokum? What ARE they smoking? I want dome, legal
-or- maybe not so much…
The truck driver shortage is temporary.
Trucks without drivers, as we know them now, will be going coast to coast in less than ten years.
Due to my involvement in a large project that will use machine control to assist drivers for operating construction equipment from GPS, I have visited two of the GPS companies in the forefront of this technology. The same tech that guides our guided weapons, will, with some adaptation, guide things that we hire drivers for now.
Truck manufacturers are applying the same tech that are presently driving cars to driving their trucks. By the time the old drivers we have now need to hang it up, there will be some trucks to take their place without (these kind of) drivers.
To quote an excerpt from the full article at http://www.wired.com/2015/05/worlds-first-self-driving-semi-truck-hits-road/
….
“The way to handle that growth isn’t to convince more people to become long haul truckers. It’s to reduce, and eventually eliminate, the role of the human. Let the trucks drive themselves, and you can improve safety, meet increased demand, and save time and fuel.”
In the near future, handling a machine with smart phone technology, will be much more important than “jamming gears”. Movies like “Smokey and the Bandit” will be the resource for students of “ancient” history.
I sell large rig truck parts at a large southeastern truck dealership. Sales have slowed down since the beginning of Summer 2015. Oct missed the sales quota which hasn’t happened in years so something is amiss. It’s not terribly bad but this isn’t the typical especially for this time of year and the price of diesel being so low. Also noticing CSX freight cars sitting idle again like was happening in 2009.
Interesting comments.
I take an annual train trip to Reno, NV
One of the stops is Grand Junction Colorado.
Normally this is a mostly abandoned very large train yard.
This year I was surprised to see hundreds of idled Union Pacific locomotives as far as the eye could see.