Freight Costs, Volume, Demand All Surge across Trucking & Rail, Inflation Fears Heat Up

The Transportation Boom after the Transportation Recession.

The Cass Truckload Linehaul Index, which tracks per-mile full-truckload pricing but does not include fuel and fuel surcharges – and therefore is not impacted by surging diesel prices – jumped 8.2% in April compared to a year ago, the largest year-over-year increase in the data going back to 2005:

“Our realized contract pricing forecast for 2018 is 6% to 8%, and current data is clearly signaling that the risk to our estimate may be to the upside,” Cass said in the report. Cass obtained the data from freight invoices that it processed for its clients ($25 billion in 2017).

More broadly, freight shipment volume by all modes of transportation – by truck, rail, air, and barge – surged 10.2% in April compared to a year ago, according to the Cass Freight Index. This pushed the index, which is not seasonally adjusted, to its highest level for any April since 2007:

“The first four months of 2018 are clearly signaling that, barring a negative ‘shock event,’ 2018 will be an extraordinarily strong year for transportation and the economy,” the report said.

In terms of the industrial economy in the US, the DAT Flatbed Barometer is a good indicator, as flatbed trailers are used to haul big pieces of equipment. This includes demand from oilfield activity, which has been fired up by the rising price of oil, now at around $72 a barrel of the benchmark crude-oil grade, West Texas Intermediate. Flatbed spot rates in April shot up 26% compared to a year ago.

And this is what that astonishing spike in demand for flatbed trailers looks like on DAT’s Flatbed Weekly Barometer (chart via Cass). Obviously, this spike cannot continue in this manner:

Intermodal freight describes freight that involves several modes of transportation. In the US, this would mostly be a combination of truck and rail. This may be a container that is hauled by truck to an intermodal facility, loaded on a train, taken to the destination city where it is transferred to a truck for the final stretch. This may also include semi-truck trailers whose trajectory includes a stretch where they piggyback on special rail cars.

The Cass Intermodal Price Index, which includes fuel prices, rose 6.6% in April compared to a year ago, the 19th month in a row of year-over-year increases.

In terms of intermodal shipment volume, not pricing, the Association of American Railroads reported that so far this year through May 12, intermodal unit shipments rose 5.9%.

The broader Cass Freight Expenditure Index, which tracks the amounts spent by shippers using all modes of transportation – truck, rail, barge and air – and is a function of price and volume, soared 12.8% compared to a year ago. This is the 7th double-digit year-over-year increase in a row:

“April’s 12.8% increase clearly signals that capacity is tight, demand is strong, and shippers are willing to pay up for services to get goods picked up and delivered in modes throughout the transportation industry,” Cass noted.

In other words, 2018 is turning into a transportation boom fired up by strong demand and tight capacity, leading to pricing power among transportation companies, and they’re able to raise prices and make them stick. Total retail sales were up 5.3% in the first quarter from a year ago, with e-commerce sales up 16.4%. Oil field activities are booming, and other industrial demand is also strong. The transportation business is highly cyclical, given to ebbs and flows of high demand and tight capacity producing sharp price increases, followed by weakening demand and excess capacity. And for now, prices are rising sharply across the sector.

But for many of the companies in the goods sector, these rising prices mean higher input cost. Numerous companies have already lamented those rising costs in their earnings calls, and they’re all trying to pass them on. Some are able to, and others are still trying. Via this mechanism, these prices are starting to work their way into consumer goods. And the Fed is paying attention.

Only about half of retail is under attack from e-commerce, but that half is getting crushed. Read…  Brick & Mortar Meltdown Pummels These Stores the Most 
 

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  88 comments for “Freight Costs, Volume, Demand All Surge across Trucking & Rail, Inflation Fears Heat Up

  1. J.M.Keynes
    May 21, 2018 at 8:34 pm

    – What happens to wages/salaries ? If those don’t rise then that will reduce spending power of the average consumer and push the US (deeper) into a recession. No matter how many taxcuts the Trump administration will dole out.
    – Brace yourself then for a VERY dismal/weak “Holiday season” (like in mid 2008) when it comes to spending.
    – When I look at the trend of the 3 month T-bill rate then I think that it’s (very) unlikely that the FED will lower rates. The chances of a rate hike are higher, although only modestly.
    – Although, the yield curve seems to be starting to sing “a different song”. And that would suggest that the FED will lower rates in the coming months. But that’s something that we’ll have to keep an eye on in the next month(s). It’s simply too early to tell what the direction of rates are going to be.

    • alex in san jose AKA digital Detroit
      May 22, 2018 at 1:38 am

      Geeeeez 2008 … A lady who owns a local store here in San Jose, in Japantown, it’s the Nichi Bei store but locals call it the N-B store, it’s been around 100 years or so and it’s where I bought my futon. And I’ve bought other odds and ends there too.

      So the people who own it are shoot-the-breeze level friends. And one day the lady was telling me that they had a Christmas card mailer type of thing that had built up over the years and was something like 7000 addresses by then. Well, in 2008, when they mailed these out, they got a huge number of them back because people had moved, lost their houses, etc. She said it was very sad.

  2. May 21, 2018 at 9:04 pm

    Geeeez is wolfstreet for suicidal depressives who need that final nudge? Do you EVER post ANYTHING POSITIVE? No seriously, I mean it ….. Are you actively disposed to censoring all positives and only peddling negatives?

    • Rob
      May 21, 2018 at 9:39 pm

      This article is actually amazingly positive. It asserts that business across America is booming. It would be nice if Wolf could elaborate exactly what businesses are doing the best.

      The Russel 2000 is making new highs daily!

    • Nick B
      May 21, 2018 at 9:43 pm

      His message is a positive for the economy as a whole. I find his posts very balanced to be honest. The information is the information, put whatever spin you want on it.

      • sierra7
        May 22, 2018 at 7:31 pm

        This site one of the few that post “positive” tales about the economy. This one is a good example. Heavy equipment movers are booming; that is positive with a capital “P”! Though if oil drops below $70 barrel things may change. Other than Naked Capitalism there is no other site I can think of that equals this one. Zero Hedge has been swilling down the toilet for couple years. Horrible commenters and terrible writing. I think the graphs presented are really astonishing! Those really tell the story.

    • BirdBrain
      May 21, 2018 at 9:58 pm

      If you want to see censoring of positives, head on over to Communist News Network‘s markets page. Their headlines are something else. Right below the ticker of 25,000 Dow they write “TROUBLE in big food..TURMOIL”. How ’bout that for mind control? Not a peep when the markets are up—but when they go down by as much (or less), anti-Trump propaganda ensues. I don’t think Wolf is on their level :)

    • May 21, 2018 at 10:27 pm

      John Blackwell,

      Why don’t you read the article instead of wasting valuable bandwidth with nonsense. The article is talking about a boom!!! Do you understand the meaning of the word “boom”? Probably not.

      At least read the title and subtitle before commenting!

      • Bart
        May 22, 2018 at 3:34 am

        Wolf,

        How much of the price increases in freight costs are due to limited capacity vs surging demand?

        Sans flatbed demand due to fracking industry, is transportation capacity limited by infrastructure limitations (# rail cars, trucks etc) or the availability of qualified people to drive trucks and otherwise operate transportation equipment?

        Do you have data as to what % of capacity our major ports are operating at like Long Beach, Newark etc?

        • May 22, 2018 at 8:29 am

          Bart,

          Check out the broad volume-based Freight Index (2nd chart). It indicates shipping demand. It doesn’t involve pricing or capacity.

          Also, intermodal shipments (not pricing), as reported by the AAR, are up 5.9% so far this year. This too is a demand measure unrelated to capacity and pricing.

          So there are capacity issues, etc., but higher demand is making them issues.

      • d
        May 22, 2018 at 3:53 am

        This sort of activity increase, generally results in large tractor orders being placed, although a large number of low mileage ones were mothballed in the 2016/7 period, as there was nowhere to dump them to.

        Are these sorts of orders being seen??

        • May 22, 2018 at 8:46 am

          Yes. There has been a boom in Class 8 truck orders. I reported on that a month ago and I guess I should have included it here. So here are the most recent data:

          Class 8 orders for April surged 50% from a year ago to 34,700 units, though this was down from the blistering record set in March of 46,300 units, which had been more than double the orders of March 2017. Trucking companies are gearing up for a lot more work.

          This is where the cyclicality of the industry comes in: in good times, everyone orders trucks and trailers, and when they’re finally on the road, demand backs off, and then overcapacity sets in, and prices drop.

        • d
          May 22, 2018 at 7:38 pm

          “Class 8 orders for April surged 50% from a year ago to to 34,700 units, though this was down from the blistering record set in March of 46,300 units, which had been more than double the orders of March 2017. Trucking companies are gearing up for a lot more work”

          Or are many of them replacing a lot of old Sh*&e that they no longer have the down time to maintain??

      • Mean Chicken
        May 22, 2018 at 5:20 pm

        Or BOOM, as in the 1st few years following TARP while the narrative was carefully engineered to keep scaring retail investors. :)

    • Bobber
      May 22, 2018 at 9:42 am

      If you want to hear nothing but positives about the economy, listen to American Association of Realtors, Federal Reserve, Donald Trump, CNBC, ABC, NBC, CBS, Fox, etc. You don’t have to search for a positive bias.

      Frankly, we need more news sources that aren’t afraid to talk about what could go wrong.

    • Ambrose Bierce
      May 22, 2018 at 11:30 am

      I agree there is nothing ‘positive’ in this report, backwash from the tranny recession. Walmart sent me an email a long list of clearance items, and i saw some things that seem like a good deal. My favorite barometer is Harborfreight, where it seems as though each time you buy something, its marked down the following week. The shoppers in the store are doing nickel and dime items. Put it all together, tight fisted consumers and falling prices, might seem like good economic news, and there is nothing to back the inflation myth either, other than the alternate explanation, the great credit squeeze.

  3. GSH
    May 21, 2018 at 10:08 pm

    @JB – What I took from the article is that transportation is booming – how is that negative? Also, if transportation is doing well, it implies the general economy is doing well.

    • van_down_by_river
      May 21, 2018 at 11:46 pm

      Yup, Americans using credit to buy a bunch of junk they don’t need, produced in foreign countries. Why yassir life dun be good, hope ya’ll enjoyin ya free lunch, yum yum give me some.

      Also wonderful to see, while I’m out for my lunch time walk, so many folks out driving around in the middle of the day. Traffic jams of people out enjoying the middle of the day sunshine in thays cars. Was once a time when people had to toil at jobs in the middle of the day but now with the new economy everun enjoys wonderful leisure – lord it’s a blessin, aint it.

      • blindfaith
        May 22, 2018 at 7:01 am

        Hey…wait a dog-gone- second….the new YOU-PHone #1587 edition Mark 9, just came out in a new color. A color never seen on the YOU-PHone before. I have a feeling all those trucks are carrying a heavy load of them to stores nationwide because of a big demand. And these are indeed very special, the price tags are made in America this time.

        Unless these trucks and trains are carrying arms, I seem to be missing just where the demand can be….ain’t at the stores.

      • juanfo
        May 22, 2018 at 4:51 pm

        A lot of people work out of their cars, back and forth to meetings, jobsites, patients… It could be anything but you’re right a lot of those drivers are just wasting time.

  4. Night-Train
    May 21, 2018 at 10:34 pm

    Nothing in the economy is static. And all the different sectors usually work with or against each other. From what I have gathered from Wolf and others, is that shipping in general, and it’s components individually, are canaries in the coal mine. Shipping costs rise; someone has to pay the freight.

    Some players will be able to pass the increased costs along; others will not. I expect many will and that will put increasing pressure on the bottom two rungs of our three step socioeconomic ladder.

    And many readers here and others recognize that the economy appears to be doing well in some areas, but it still wouldn’t take a very big black swan to create a lot of havoc.

  5. Kaz Augustin
    May 21, 2018 at 10:41 pm

    I remember you writing about how the Shanghai Dry(?) Index had also floated to a complete stop, Wolf. Any insight into how it’s doing now? So okay, the Linehaul Index indicates some progress in the US (thought it was just going to be small haulage, so colour me surprised at the Flatbed figures), but what about internationally?

    • May 21, 2018 at 11:56 pm

      The China Shipping indices (Shanghai Containerized Freight Index and the China Containerized Freight Index) rose after the transportation recession and the bankruptcy of Hanjin, but then fell again. Shipping volumes seem to be OK, but overcapacity still plagues the sector. I’ve been thinking about covering it, but I have trouble getting good data on why spot and contract rates have refused to recover correctly, and why they started sinking again in Feb.

      The shipping industry still complains about overcapacity, but they keep ordering new ships….

      • Bart
        May 22, 2018 at 3:41 am

        Wolf,

        Container industry transitioning to much bigger ships to drive efficiency, no? More deep water ports to accommodate. Cost to bring 20fte across ocean much less w newer and bigger container ships. What becomes of older ships, bought on cheap from bk or sold as scrap?

        Any idea if new ships burn more efficient fuel vs sludge that fuels older vessels?

      • d
        May 22, 2018 at 4:07 am

        “The shipping industry still complains about overcapacity, but they keep ordering new ships…”

        This will keep on until china wins or looses in its attempt to take over all shipping and ship building in Asia and then the entire planet.

        How do you compete with CCP owned china COSCO when CCP owned shipbuilders are still giving then new ships for Free, effectively.

        Rates are not rising as the chinese are using an endless supply of printed RMB/CNY in an attempt to break the euro shippers.

        He who controls the ships, controls the trade.

        • MC01
          May 22, 2018 at 11:21 am

          I’ll answer here to both you and Bart above.

          While it’s true that China COSCO, the new State-owned shipping titan the central planners in Beijing are building, has been helping local shipbuilders by placing lots of orders, the bulk of the new super container carriers (such as the OOCL Hong Kong, a 21,000+ TEU now owned by China COSCO) are manufactured by the Big Three, the three huge Korean shipyards that have come to dominate the market for extra-large commercial vessels: Daewoo, Hyundai and Samsung.
          On top of this there are only three firms with the know-how to build the immense two-stroke diesel engines used by ultra-large commercial vessels: MAN of Germany, Mitsubishi of Japan and Wärtsilä of Finland (due to their buyout of Sulzer’s diesel engine division in 1997). Chinese shipyards may build the ships, but the all-important propulsion systems have to be imported.

          One of the few technical areas where China is really struggling to catch up are large commercial engines, be them aircraft turbofans or large two stroke diesels. Even their bombers are powered by Russian-made turbofans.
          AECC is under tremendous pressure from their political bosses to “deliver” an indigenously-developed aircraft turbofan for the new COMAC C919 airliner, a turbofan comparable with the CFM LEAP-1 without being a straight copy. But I am digressing.

          The issue of ship size is extremely complicated and not merely driven by efficiency.
          Apart from technical considerations (more on which in a minute), the world’s shipping lanes have a number of “chokepoints” that effectively limit the size of the ships that can sail through them. And building new deep water ports can be a risky endeavor: the Länder of Niedersachsen and Bremen have financed the construction of a brand new deep water port near Wilhelmshaven called JadeWeserPort to “steal” business from Hamburg, Danzig and even ARA (Amsterdam-Rotterdam-Antwerp). But it’s failing to catch on and works at such a small fraction of its present capacity (400,000 TEU on a 3,000,000 TEU capacity, with much more coming on line) it has become the classic “financial black hole”, partly due to the fiscal incentives offered to shipping companies for unloading their cargo at JadeWeser.

          To speak again of engines, yes, maritime two stroke diesels still run on bunker fuel (“heavy oil”) and they are really pushing the envelope: MAN has been working with Maersk on a new 14-cylinder engine for container ships over 15,000 TEU and it’s really proving a handful partly because the present engines are so efficient and partly because Maersk’s specs are extremely hard to meet.
          These engines are generally designed to run at around a certain rotation speed (usually 75-100rpm but there are significant differences) for maximum efficiency and while making them run below it saves some fuel, efficiency suffers and maintenance costs become higher.
          Maersk would like an engine that keeps a remarkable efficiency but can be run at low as 25rpm and as high as 120rpm, to take advantage of low fuel costs when oil goes down and to offer lower rates (by going considerably slower) when oil goes up.
          That’s quite the engineering challenge and it may require some very clever solutions.

        • d
          May 22, 2018 at 7:58 pm

          A lot of good information there for those that need . can see you getting some questions from those that dont understand it.

          For the chinese West bound, Malacca-max Draft, is an “issue”.

          Man will in the end, meet Maersk Specs. They have no choice.

          The emissions war on Bunker, is finally ON.

        • Dan Romig
          May 22, 2018 at 9:22 pm

          Thank you MC01, I learned quite a lot reading your reply!

        • Dan Romig
          May 22, 2018 at 9:39 pm

          Is it true that these Maersk 14 cylinder turbo engines consume 16 tons of fuel per hour, and that the fuel has 2,000 times the sulfur as diesel fuel used for cars on the road?

          I would not want live downwind of a harbor or a heavily travelled straight where these things are running.

        • d
          May 22, 2018 at 10:20 pm

          I am unsure of accurate numbers and to lazy to check now, but yes they do use “Tons” of bunker fuel an hour, and it does produce hundreds, if not thousands of times more, combined negative emissions, than land based diesel powered vehicles per liter/Gallon/Ton.

          Even the liquid diesel vessels, are much higher in combined negative emissions, than land based diesel vehicles.

          Maritime vessels, have NEVER BEEN emission regulated. AT ALL.

          If you ever meet bunker fuel, you will understand.

          Cold bunker fuel (not frozen or chilled just naturally cold) in a tank, can be walked upon by humans, it goes hard, so hard, it has to be heated with steam/hot water, to make it flow/ OOZE before it can be pumped, then preheated to be used as fuel in engines. Like Animal Glue.

          Bunker fuel is all the nasty S*(t left over, after Crude oil has had the useful high grade fuels and other, chemicals, oils, gasses, extracted from it.

          If you start out with nasty iranian or venezuelan high-sulfur heavy crude. Imagine what is left afterwards. Think of the carbon content per ton (You know carbon that black stuff that dosent burn) that ends up floating round in the sky after combining with oxygen, heating up the planet, after being emitted from ships.

          The engines that run on bunker fuel, will run on used, Engine/Gearbox(transmission)/Differential oil, Unfiltered.

        • Kaz Augustin
          May 22, 2018 at 11:53 pm

          Wow, thanks to all who replied, esp. MC01. Very educational. :)
          So international shipping is a mass of contradictions, eh? How about that.

        • MC01
          May 23, 2018 at 6:41 am

          Your questions will be (mostly) answered in a short piece Wolf Richter kindly asked me to write, albeit I fear the quality won’t be up with the usual content here.
          For those who cannot wait a few quick answers.

          Fuel consumption in most industrial (including marine) engines is given in weight of fuel consumed per unit of energy generated: this usually means grams per kilowatt hour.
          So if a marine engine has a consumption of 170g/kWh it means it needs 170 grams of bunker oil to continously generate a single kilowatt of power for a hour. As these engines continously produce thousands or even tens of thousands of kilowatt it’s easy to understand why daily consumption is in the order of thousands of liters. Maersk Triple E container carriers use on average over 78,000 liters of fuel per day.

          Regarding pollution. It’s not a recent concern: the MARPOL protocol dates back in its original form to 1973 and over the years has been tightened and now includes every aspect of pollution related to marine traffic, from sulfur content in fuel to how the waste from ship latrines has to be processed and where can it be dumped (not a joke when modern cruise ships are considered).
          However enforcement is spotty to say the least outside of the territorial waters of a few MARPOL signatories

          The rest will be answered soon. I hope.

        • d
          May 23, 2018 at 7:01 am

          As it’s probably mostly technical the prerequisites would be accuracy and readability.

          If it has those, it can not fail.

          As you say Outside US and EU coastal waters maritime regulation enforcement is to say the least spotty.

          The Costa Concordia shows how sloppy even Europe is, that a vessel commander would dare to do such in EU waters.

        • Dan Romig
          May 23, 2018 at 4:47 pm

          MC01, this is what I read last evening (Tuesday 22 May) after reading your insightful reply twice.

          http://www.livebunkers.com/bunker-fuel-pollution

          I look forward to learning more, and thank you for sharing your knowledge with us WS readers.

          P.S. The size of these MAN power plants that push the freighters across the oceans is staggering.

    • MC01
      May 22, 2018 at 6:16 am

      Wolf has it nailed there, as his usual: the shipping industry is not merely drowning in overcapacity but is adding to it on assemingly monthly basis.

      Maersk is finishing taking delivery of ten second generation Triple-E container carriers each of which has a carrying capacity of over 18,000 TEU: for the uninitiated, it means each ship can carry over 18,000 standard 20-ft containers. That’s a whole lot of teddy bears, smartphones and food additives.
      These ships will not replace but supplement the present Maersk fleet and are dedicated to the Europe-China trading route, which is becoming pretty crowded.
      Orient Overseas Container Line, the Hong Kong shipping concern recently bought by COSCO, already has a 21,000+TEU container ship in service on the Europe route and there are many more ships over 20,000 TEU either in costruction or on the drawing table. Talk about overcapacity.

      These container ships can still clear the Strait of Malacca, albeit barely so (VLCC’s, the immense oil tankers running the Gulf-China/Japan/Korea routes, must take different routes), and are reaching the physical capacity of most commercial harbors worldwide: just to give an example in the US only the recently upgraded Port of Los Angeles could handle the aforementioned Maersk Triple E carriers.

      All the big players are still expanding their fleets: Maersk, COSCO, CMA CGM, MSC… this is part of a trend I am also seeing in aviation. Just drive past the Basel-Mulhouse airport and you’ll see the rows of former airliners being converted into freighters. The market at the moment is so hot Boeing is contemplating designing a 777 freighter conversion to supplement the cargoes they are already selling: plainly put the demand for widebody freighters at the moment is so hot it would be a great way for Boeing to both make a quick profit without investing precious manufacturing resources (conversions are carried out by approved contractors such as KAL Aerospace of Korea) and restrict the supply of low-pressurization cycles 777’s.

      That’s why despite rising energy costs and a generally inflationary environment rates don’t raise, or don’t raise as fast as one would expect.

      • May 22, 2018 at 9:03 am

        MC01,

        Thanks for providing the data!

  6. Alex
    May 21, 2018 at 10:50 pm

    It is the boom before the crash.

  7. Rob
    May 21, 2018 at 10:55 pm

    As the owner of a trucking company that moves specialized oversize loads locally and cross country I can say it is very busy and rates are up for change. Problem is it’s really hard to find drivers and the wages need to increase. Years ago my guys always were above or on par with pay as a local police officer or calif highway patrol, now law enforcement with no college education is 10 to 20k above the drivers, not to mention all the benefits they recieve. New government mandated electronic log books have not helped, drivers hate them and I can understand why. It’s not just a hot economy but rather a mixed scenario of driver shortage, high operating cost with new diesel engines for air quality, high property cost for a terminal that are really driving up cost.
    I could easily double my fleet but no qualified drivers!

    • Mark
      May 22, 2018 at 12:15 am

      Give autonomous vehicles another 3-5 years and you won’t have any problem finding drivers – there won’t be a need for any.

      Long distance trucking by human truckers is going the way of the travel agent or bank teller very, very soon.

      • Rob
        May 22, 2018 at 9:27 am

        Mark
        Oversized items as in where I move a 747 aircraft will not be driven by autonomous trucks! Basic freight trucks I am sure will be.

    • gunther
      May 22, 2018 at 11:03 am

      Who wamts to drive a truck?
      Workong hours start monday morning 3 am an be on the road till some time friday for a halfway decent pay. The driver gets paid by the mile and hence takes the risk for traffic jams and other waiting times eg at the border. The time off during the week is spent in some truck stop on the highway. Get diabetes and the truck license is gone.
      To me it is astonishing that there are so many people driving under those conditions.
      ;

    • John seddon
      May 22, 2018 at 11:32 am

      Until trucking rates reflect the cyclical nature of having to invest long in new equipment and take account of the risks involved, truckers are reluctant to invest. Drivers wages and fuel costs are major items. The introduction of digital tracking of assets plus tighter control of the hours drivers can work is causing drivers to seek less demanding and better paid work in other sectors. The outcome will be a substantial increase in trucking rates to attract new entrants to work in the industry, which could stimulate driverless trucks.
      Expect some major rate hikes in June, particularly from the large operators.

  8. Debt Free
    May 21, 2018 at 11:21 pm

    The last time we had the triple combination of rising interest rates, rising oil prices, and robust freight was in 2007/8. Something happened after that, but it’s been so long that I don’t remember. Can someone here refresh my memory? ;-)

  9. van_down_by_river
    May 21, 2018 at 11:25 pm

    and yet, another Fed head (Neel Kashkari) was out blabbing again today about how the Fed needs to slow it’s roll on QT and let inflation run hot.

    To any suckers still holding cash or bonds the central banks are screaming from the tops of the mountains “we are going to destroy our currencies”. In the end those left holding confetti cash can’t complain they didn’t see it coming. The central banks have made the ongoing currency devaluation common knowledge to anyone listening.

    The world is awash with trash cash and more keeps coming, it’s relentless. I suggest Trump nominate Gideon Gono for one of the open spots on the Fed, let’s get it over with.

    • Petunia
      May 22, 2018 at 10:58 am

      I don’t get what underlying value you see in equities, as opposed to bonds, and cash. If you look at the stock market critically, you can see that at the margins, people who just want to stash money are avoiding it. They can perceive the downside risk and are opting for real estate instead. Bond holders are slightly better off because at least they get an income stream, until they don’t. Those in cash will only be hurt by the ponzi schemes becoming bigger and that has a limit, as eventually the schemers run out of suckers and their money.

      Make sure you get your timing right or you will land up very sorry too.

  10. akiddy111
    May 22, 2018 at 12:15 am

    Nine years without a recession and now we’re booming ?

    Did anyone else miss the party ?

    • Night-Train
      May 22, 2018 at 12:42 am

      Yes. But I am expecting my invitation any day now.

      • akiddy111
        May 22, 2018 at 1:09 am

        Good. I’ll fill you a half full glass of punch when you show up.

        • blindfaith
          May 22, 2018 at 7:07 am

          Better have some vodka in it or I ain’t cummin’. Need something to ‘lift’ the sprits. Am making what I did 30 years ago and no party here.

        • alex in san jose AKA digital Detroit
          May 22, 2018 at 4:12 pm

          Am making **less** than I did 30 years ago, in non-adjusted dollars.

          This is reality for the 90%

        • juanfo
          May 22, 2018 at 5:31 pm

          more like kool-aide

  11. Realist
    May 22, 2018 at 12:29 am

    Interesting article once again. Wolf is always interesting to read.

    One thing that I’d like to know. Is there available regional statistics breaking down transports on basis of cargo ? It would be interesting to see the percentage caused by people moving to a new location.

  12. GP
    May 22, 2018 at 12:45 am

    Huh. So it is finally ‘trickling’ down after how many years?

    • May 22, 2018 at 8:23 am

      That’s not what the article is saying. This is a cyclical industry. Check out the charts.

  13. raxadian
    May 22, 2018 at 5:27 am

    More online sales means more shipping, more shipping means more goods transportation demand, more demand means truckers and transportation companies want more money.

    If the railways had not been ruined so much to favor Ford, GM and their pals, shipping costs would be way cheaper.

    Amazon wanting to fix the railway industry to drive transporting costs down?

    Eh I don’t see it happening, but who knows?

  14. mark
    May 22, 2018 at 6:31 am

    I’m sure the single party in the USA (The War Party Of The Rich multi-millionaire Congress) and their unelected buddies at the unelected Fed have nothing but our best interests at heart.

  15. DK
    May 22, 2018 at 8:06 am

    I noticed the Amazon has raised their annual fee for prime by 20%.

    • Petunia
      May 22, 2018 at 11:08 am

      They are probably taking shipping costs into account in upping the membership fee. However, you can drop the membership and still get Amazon pricing and even faster acquisition by using price matching in the big box stores, and you don’t have to wait for the item.

      • alex in san jose AKA digital Detroit
        May 22, 2018 at 4:15 pm

        I return a ton of shit to Amazon. I’ve noticed I don’t seem to be getting free returns any more; I have to pay the shipping. Which is OK as Amazon is dodgy as hell and about 20% of the time the item is broken, wrong, or just never arrives at all.

        Apparently my tiny hamlet of a little over a million people can’t supply things like “smartwool” socks which I swear by, vac bags for my little Husky shop vac, things like that. So to Amazon I go. But there are things that are impossible to buy online and one should not even attempt, like clothing, or used books.

    • Debt Free
      May 22, 2018 at 11:18 am

      I avoid using Scamazon unless absolutely necessary. Someday when Jeff Sessions wakes up from nap time he will bring an anti-trust lawsuit against them.

  16. MF
    May 22, 2018 at 10:29 am

    Is it just me, or is there a broader trend showing up?

    Cyclicality seems to be amplifying over time, with larger and faster up/down swings. If we assume the transition to a delivery-based retail economy is continuing apace, could we be seeing consumer demand affecting freight volumes more directly and immediately these days?

  17. Prairies
    May 22, 2018 at 10:32 am

    At first I thought maybe it was the constant climb in fuel costs. But I am starting to think after seeing your chart that it seems too much of a coincidence that the rates started to go up as the Electronic Log Book Rules were first introduced Feb. 2016 and compliance date being Dec. 2017.

    Looks like the labour required to legally haul all of these goods can’t cheat on their hours so more labour costs are possibly being the driving cause of this increase.

    • May 22, 2018 at 12:43 pm

      Look at this way: there is an increase in demand, with more goods needing to be shipped (2nd chart). This smacks into supply constraints caused by a shortage of trucks and drivers, plus the problems caused by now required electronic logging devices (ELDs). In addition, there are fuel price increases. So that increase in demand hits these supply constraints and additional costs, and prices go up.

      • Prairies
        May 22, 2018 at 12:49 pm

        Weirdest part is I just bought a computer to replace my 10 yr old dinosaur of a pc and no freight on the bill. Insanity! – also not from Amazon or Ebay.

        • May 22, 2018 at 1:53 pm

          You paid for it in the price. You’re the end-user. You paid for everything, the entire chain, all the way back into China, Taiwan, Thailand, and other countries where parts, components, software, and the whole assembly originated :-]

        • May 22, 2018 at 1:54 pm

          Also, you’re living proof of the increase in demand , after ten years :-]

        • BirdBrain
          May 22, 2018 at 4:55 pm

          $100 + $15 shipping/handling
          -or-
          $115 FREE SHIPPING!

          It has been this way since its inception. You aren’t actually getting “no freight”.

          You really didn’t know that?

        • Prairies
          May 22, 2018 at 5:16 pm

          I would agree about the freight being baked in, but every item I bought had a 10 to 20 dollar rebate, after already having a discount before the holiday weekend.

          I bought a computer worth 1500 canadian for all of 1000. More discounts than freight mark up. Either they are desperate for sales or they are aggressively trying to murder brick and mortar and I can’t see them being hard up for sales.

        • BirdBrain
          May 22, 2018 at 6:01 pm

          If you paid 1000, that’s likely what it was “worth”.
          PC sales expected to drop 4.4% this year [though it does appear they increased this quarter]. I think they’ve been in decline for years—especially with the cr@ppy OS they come with, W10.
          I will continue running my old system until it dies. And when it does, I just might replace it with a used W7 machine. I haven’t bought a used PC in 25 years! That’s how I feel about W10!

        • Prairies
          May 23, 2018 at 9:18 am

          Birdbrain.. Just a heads up. Buy now if you want windows 7. The new generation of motherboards no longer support windows 7 across the board. Only a few left support it, which means in the next year or 2 windows 7 won’t be support on all new boards. I spent 1000 on my computer 10 years ago, I have kept inflation down in that regard. As far as OS, Microsoft has no competition in the market so the software gets neglected. Linux or Apple have to do something revolutionary in the next 5 years or the next Windows offering will be even worse.

  18. Bobber
    May 22, 2018 at 10:49 am

    I think we are now finally seeing the wealth effect in action. Stocks and RE prices have run so far, people are starting to feel wealthy and they are spending. This explains why spending is growing despite meager wage gains.

    This is also why the Fed is putting a lid on stock gains by raising the interest rate.

    • blindfaith
      May 22, 2018 at 11:06 am

      I think a good read is over at Audiogon forms where they will be happy to contradict you. Ebay sellers will gladly give you their experiences too. Oh, and don’t forget Audio Mart. If guys are not spending on Audio, something is wrong at the core. I know guys who sell on Amazon and are looking for a grocery bagging job. Cars, at 60K plus, sure lets get two. Buying the $1,200 You-phone edition 2758, mark 9 just because it is a new color is not spending growth, not when it is obsolete and no one can use it three months later.

      I noticed you mentioned “people’ are spending so you must know some, what about you? What are you buying?

      • Petunia
        May 22, 2018 at 11:27 am

        Since extra money started coming in from the tax cut, I have been spending it. We had accumulated a list of items we needed but couldn’t yet afford. I have been able to put a dent in the list since February. It included bedding, clothes, and a really nice Easter brunch.

        I think the tax cut has put the average worker on a firmer footing. Just buying shoes for the kids is a big expense in most families. Not to mention buying the better cut of beef for a change.

        • sierra7
          May 22, 2018 at 7:51 pm

          As a long time retiree with very modest income I’ve been perplexed and challenged as to where I could spend my “extra $7 (yes, seven dollars) refund…..LOL!!!!
          (I’m not complaining; I live well on my retirement income plus a modest amount of savings in CD’s)

  19. nick kelly
    May 22, 2018 at 11:12 am

    ‘Trumpanomics will cause the next recession in 12 months’

    Headline: David Rosenberg in Globe and Mail (circa May 19 )

    His reasoning: a completely absurd stimulative ‘tax cut’ when every indicator including this fantastic jump in transportation costs calls for a withdrawal of stimulus.

    In fact if there are any Keynesians out there (who have actually read him, in a condensed text) we are rapidly approaching the point where we should be running a budget SURPLUS.

    A budget surplus, what a quaint idea. Don’t use that term near millenials, you will date yourself.

    Moving on: If I understand WR, this 8% plus increase does NOT include fuel surcharges,which at these fuel prices will be coming, so the rise may actually be double digits.

    The so- called ‘tax cut’ is not paid for it’s borrowed.

    All these orders for long term assets, more tractors etc. etc. which will of course be financed at rising rates, are in anticipation of a decade of expansion. They are based on a fantasy, as in 1928.

    The Fed really has no choice but to swim against this tide. Maybe the Fed will be have to be eliminated via a tweet.

    Leaving Rosenberg and moving on to excerpts from Vanity Fair: the US has a CEO who is averse to information, and doesn’t care for those who try and help out. He has twice had Bill Gates explain to him the difference between HIV and HPV. He forgot the first one.

    He has asked a group of economists if they have heard of ‘pump priming’ which VF likens to asking mechanics if they’ve heard of steering
    wheels.
    The authors of economic and trade briefs have been asked to slim them down. They did: to one page.

    Still too long. The staff gets back to the briefers: try and come up with visuals. So they do. VF source says the captions are along the lines of: ‘See Jane Run’

    A few weeks ago, big announcement of crack- down on trade and IP theft by China.
    So China targets soybeans from Trump- friendly Iowa, where, oddly, President Xi has spent more time than Trump. (He spent two weeks there around 2012 studying agriculture)

    Stock market down.

    Next week: big announcement: Trade war off. China will buy soybeans (it had too anyway) IP issue disappears. Stock market up. A win!!

    If you think this ends well, order a truck.

    • Mean Chicken
      May 22, 2018 at 10:14 pm

      What about the drought in Argentina and Uruguay? Arjentina just bought 200,000 Tons of US soybeans and Europe placed it’s largest order in 15 years.

      • nick kelly
        May 23, 2018 at 11:32 am

        Agree. The market is tight for soybeans. However that was extraneous to the point, which is the mercurial. unpredictable, ill- informed and possibly irrational US CEO.
        Trade war on, trade war off etc.

        The latest fiasco is his attempt to personally order a role- back of sanctions on a Chinese phone maker, ‘to save jobs in China’ only to have his order overridden by a near unanimous vote including GOP members.
        There had of course been a large Chinese investment in a Trump related project just before the attempted roll back.

        RE: 1928. Or 1999 or 2006 etc. This is not time to go out on a limb because people feel good. They also felt good in those years.

  20. J.M.Keynes
    May 22, 2018 at 11:47 am

    – I actually have changed my opinion. I now think the FED could raise rates next time because the 3 month T-bill rate has risen more.

  21. lee martin
    May 22, 2018 at 1:52 pm

    Freight volume is slightly higher than a year ago, the trucking industry is being ham strung from the new electronic log book rules. The drivers have lost about 25% of driving time with the new regulations. 25% less driving time = 25% more trucks needed to move the same freight compared to a year ago. There is no BOOM in freight volume, new laws have cut down on driver production.

    • Petunia
      May 22, 2018 at 2:18 pm

      Everything they do is on purpose. Lower driver productivity supports their driverless trucks agenda, now they can easily prove it’s more efficient to get rid of the drivers.

      • d
        May 22, 2018 at 8:09 pm

        “Everything they do is on purpose. Lower driver productivity supports their driverless tr”

        Lady

        Maximum US driving hours let alone the Industry US wide accepted cheating. Have been unsafe since the regulations were drafted.

        Consumers are going to finally have to start paying a fair labour cost to transport operators in the US.

        Safe Driver-less trucks, for anything other than milk-runs, are still far in the future.

        American drivers are still paid on Mileage THAT IS SLAVE LABOUR, and illegal in many other countries. As it encourages operators to cheat, on on duty, non driving hours.

  22. jon
    May 22, 2018 at 2:42 pm

    The economy is doing pretty good and people are feeling good as well.
    If this is not the case, people won’t be spending this much money.

  23. Edward Johnson
    May 23, 2018 at 1:36 am

    North America’s freight railroads are doing just fine and have never been in better shape or have ever hauled as much intermodal as they are doing now. Union Pacific and BNSF Railway dominate the western two-thirds of the U.S. and for several months have been hauling more than the previous year months in both intermodal and total freight volume. So far this year, UP is up 4% and BNSF is up 6% in the intermodal category. BNSF is up over 22% in hauling semi-vans. Late last year, BNSF set an all time record of 220,000 intermodal units hauled in one week. BNSF became the first railroad to complete the installation of Positive Train Control last year and it has already prevented at least one major collision. BNSF is also regularly moving intermodal trains that are over 3 miles long (290 vans and containers) totalling over 19,000 tons per train, on the Southern Transcon with just 2 crew members. The volume on their Northern Transcon is also way up. Similar increases have been reported in the East and also in Canada, especially by CN RR from the expanded port of Prince Rupert, BC. The BNSF says that they still have considerable excess capacity to handle more traffic on their system.

    • Edward Johnson
      May 23, 2018 at 4:02 am

      Actually, the 3 mile long train (16,000 feet) in my previous post, could have handled up to double the number of containers (580) if they were all double-stacked. BNSF remains the leader in freight hauling ability, having handled 43% more intermodal than UP RR, so far this year, and 22% more total freight volume than UP, so far. Up RR is the second largest hauler in the U.S. They own more track than BNSF, but they can’t compete with BNSF’s Southern Transcon, which is all multiple main track between Long Beach (LA) and Chicago via Kansas City (except for 2 miles over a bridge).

      • Edward Johnson
        May 24, 2018 at 1:26 am

        AAR reports total U.S. intermodal volume, last week, was 285,142 units, up 6% from this time last year, and the third highest week ever. Intermodal spot rates up 53% from last year at this time. Canadian intermodal was up 4.4% last week, also.

  24. Rates
    May 23, 2018 at 1:58 am

    As I said before, muppets have plenty of money.

  25. Jun 4, 2018 at 3:19 pm

    What can account for this surge? I thought transportation companies were on the decline in the past years.

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