It Gets Surprisingly Ugly: US Freight Shipments Plunge 9.4%, Steepest since 2009

But the coronavirus impact has not been felt yet; that will come later.

By Wolf Richter for WOLF STREET.

Shipment volume in the US by truck, rail, air, and barge plunged 9.4% in January 2020 compared to the already weak January a year earlier, according to the Cass Freight Index for Shipments. It was the 14th month in a row of year-over-year declines, and the steepest since October 2009, during the Financial Crisis:

The Cass Freight Index tracks shipment volume of consumer goods and industrial products and supplies by all modes of transportation – truck, rail, air, and barge – but it does not track bulk commodities, such as grains or coal.

In December, when the index had plunged 7.4% year-over-year, the steepest drop since November 2009, the calendar got blamed because Christmas fell on a Wednesday, as it does regularly. In January, the year-over-year drop of 9.4% was even worse, from an even weaker month a year earlier, and this time, there is no calendar to blame.

December was the month when Celadon Group, with about 3,000 drivers and about 2,700 tractors, shut down — the largest truckload carrier ever to file for bankruptcy in US history, which came on top of hundreds of mostly smaller trucking companies that had also shut down in 2019.

January was the month when barge operator American Commercial Lines, with 3,500 barges mostly on the Mississippi River, ran aground, so to speak. After having worked out a deal with its lenders in January, it announced at the beginning of February that it would file for a “prepackaged” bankruptcy.

January was also the month when two of the largest US railroads – CSX and Union Pacific – reported terrible results, including dropping revenues and massive layoffs on broad-based weakness in the transportation business.

Rail traffic in January offered no respite from the miserable year 2019: Carloads dropped 5.9% compared to January last year; and containers and trailers fell 5.4%, according to the Association of American Railroads, “reflecting continued softness in manufacturing and global economic weakness made worse by trade uncertainties.”

The 9.4% January plunge in the Cass Freight Index for shipments pushed it below the January 2018 level and near the January 2017 level. The stacked chart – each year is a colored line – shows the large seasonality of the freight business. January is always a low point. But this January, represented by the big red square near the left bottom of the chart, was particularly weak. The top black line represents historic boom-year 2018. The green line represents down-year 2019, which deteriorated relative to other years as the year progressed:

Freight expenditures drop below January 2018.

This data is not based on sentiment surveys but on actual freight invoices. Cass derives this data from freight invoices paid on behalf of its clients ($28 billion in freight bills in 2018), representing a large sample of the actual shipments and payments in the US by numerous companies across many sectors.

In January, the Cass index for expenditures – reflecting how much shippers, such as retailers and manufacturers, spent on transportation costs, including on fuel surcharges – dropped 8% year-over-year, after having dropped 6.2% in December. It was the sixth month in a row of year-over-year declines:

Total freight expenditures are a mix of freight rates, fuel surcharges, and the volume of shipments.

In the first half of 2019, the index remained at high levels despite the sharply declining shipment volume – meaning that shipments declined but transportation companies, such as UPS, FedEx, trucking companies, and railroads, were able to increase some rates. But other rates, such a spot-market trucking rates, fell sharply.

To impress analysts during earnings calls, railroads talked about their strategy of pushing up rates in this climate, and how they would not lower their rates to maintain business – and have lost business to trucking companies in the second half of 2019; hence the railroads’ sharp revenue declines.

But expenditures are still dropping more slowly than shipment volume, an indication that the industry is trying hard to push up pricing, with UPS and FedEx on the forefront.

The average retail price of diesel in January across the US, at a few cents over $3.00 a gallon, was up about 2% from the average a year earlier, according to EIA data (though in February, the price has dropped below last year’s level):

Coronavirus not yet.

The 9.4% year-over-year decline in shipment volume in January occurred on products shipped within the US in January. The shutdown of factories and supply chains in China, which started in the second half of January, and stopped production cold in much of China, had not yet worked its way into the January shipping data in the US.

Those products that were supposed to leave China in late January and February, but didn’t, will impact US shipments, as tracked by Cass Freight index in February at the earliest, and then going forward.

Inventory levels are very high in the US. For some products, these inventories will provide a buffer, and those products will be shipped out of inventory. But other products that have not been stockpiled to that extent, and some of which may run into supply shortages, will put further downward pressure on shipment volume over the next few months. And that’s when we will see the impact of China’s factory shutdowns on US domestic shipments.

It’s not only Chinese tourists, business travelers, and property buyers who’re not showing up, but also travelers from all over the world who’ve gotten second thoughts about sitting on a plane…. THE WOLF STREET REPORT: Coronavirus Slams Airbnb, Airlines, Hotels, Casinos, San Francisco, Other Hot Spots

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  87 comments for “It Gets Surprisingly Ugly: US Freight Shipments Plunge 9.4%, Steepest since 2009

  1. Willy Winky says:

    ‘Inventory levels are very high in the US. For some products, these inventories will provide a buffer, and those products will be shipped out of inventory.’

    Keep in mind if a single part such as a door handle on a car is runs out, the assembly line stops.

    A quick check and Toyota says the average car has 30,000 different parts.

    Aside from that, it does feel as if there is an ominous chill in the air.

    Everything is going wrong.

    • Cas127 says:

      “Everything is going wrong”

      That tends to happen when gvt defines everything short of living on the razor’s edge as economically suboptimal and spends accordingly.

    • char says:

      True, but he right and left door handle are made in the same factory/process .

    • Frederick says:

      It almost seems as if there’s a curse on our country for the last 18 and a half years But I’m not superstitous so it must be nothing

    • Iamafan says:

      I went to Costco yesterday. The shelves are overflowing. Whether it’s TV, computers, food, veggies, milk, etc. If you have money it’s all yours.
      Beside the Costco were a couple of car lots. They all had so many cars that they used more lots. Too much inventory. Then I bought a bunch from Amazon to replenish my “spring” stock. Takes forever to go through the deals now (including Lightning deals). All my credit cards are offering HIGHER limits and guess what, I’m retired. In my opinion, we Americans cannot see shortages in our shores, at least not yet.

      • Fed has a new inflation targeting scheme, they are going to use an equal and opposite response. If inflation drops 1/2% they will use policy measures in order to achieve 1% increases to the current rate. Suppose they drop rates, to achieve more inflation, and they are wrong about policy responses, and that causes more disinflation?? Their mistake will be on a magnitude of 2X plus the initial lower starting point. Kind of like the golfer who is hooking the ball so he aims 50 yards to the right of the fairway, and then of course he hits one straight.

      • hendrik1730 says:

        No, but I see emptiness in peoples’wallets.

  2. Anthony says:

    Good article, Wolfe

  3. Abomb says:

    Between stuff like this and TSLA at ridiculous valuations I can’t tell what’s going on! Yikes

    • Frederick says:

      Tesla is bid up by cheap FED cash That’s what’s going on The real economy is horrible, if you extracted all the debt that’s been added since 2009 we would have been in and recovered from the crash by now and the dead wood would all be history

  4. Robert says:

    Does the Cass index account for Amazon? Is it possible that as Amazon grows and replaces traditional shipping with their own network, that freight declines happen because Amazon is moving within their own assets?

    • Wolf Richter says:

      It tracks the amounts that shippers pay to get their merchandise to their customers. Amazon existed in 2018 too, and Cass reported a huge boom in shipments for that year, as you can see in the first chart, the huge blue spikes, peaking with year-over-year volume increases of 12%. So you can eliminate Amazon as cause for the boom in 2018 as well as for the decline in 2019 and now.

      Also these shipments include industrial products, equipment, supplies, components for manufacturers, and all kinds of stuff that is not part of retail sales. This is very broad. Retail looks pretty good, and I’ll post on that in a little while. It’s the industrial economy that is in trouble.

      • Cas127 says:


        Along these lines, maybe a two yr trailing average would present a less volatile, more accurate picture.

        Business consumers may have spiked 2018 purchases to get in front of tariff implementation, then had no reason to spend in 2019.

        If y-o-y continues to fall next yr, then maybe it is time to call a trend.

        • cas127 says:

          Er, I should have said if y-o-y continues to fall over the rest of *this* yr – 2019 was the negative offset yr.

          The tariffs were put on in stages, so the spikes/crashes might come in stages too.

        • Cas127 says:

          …er 2,

          …so the spikes, crashes, and *normalization* should come in stages too.

          2018 was the pre tariff spike yr
          2019 was the post tariff blow off yr
          2020 (overall) might be the normalization yr.

      • Yes but new orders and production are growing?

  5. David Hall says:

    With the nation switching from coal to natural gas, coal transport is down. This affects both trains and barges. The spring flooding and the trade war cut grain shipments by train or barge. A huge percentage of Chinese hogs were killed by a swine virus. Less hog feed is being transported to China. There are larger container ships traversing the Panama Canal these days and there are several East Coast port expansions to accommodate a larger shipping volume by sea instead of overland by truck and train. Computerized truck freight logistics make for less empty space trailer load shipping. Pipeline expansions have come online. This decreases the need for oil tanker rail cars. There is also a case to be made for a slowing economy even though unemployment is low, foreclosures are low, and nominal GDP is growing. New building permits are near a decade high level. Housing prices have risen too fast too far (opinion). My worries about the coronavirus might be premature. Might worry about that later.

    • Wolf Richter says:

      David Hall,

      I’ll just respond to a few or your items:

      “With the nation switching from coal to natural gas, coal transport is down.”

      Yes, coal shipments have been in decline for years. But… 1. the Cass Index excludes commodities such as coal, as I pointed out in the text. So the decline of coal doesn’t impact this data. And 2. coal shipments have been declining for years, including in 2018, when the Cass index reported a huge shipment boom (see the first chart), which shows again that the decline of coal doesn’t impact this data.

      “There are larger container ships traversing the Panama Canal these days…”

      The expanded Panama Canal began commercial operation in June 2016. So in all of 2017 and 2018 and 2019, it was the same situation, and the expansion has no impact on the dramatic boom in 2018, the decline in 2019, and now the current drop because it has been there throughout.

      “Pipeline expansions have come online.”

      Pipeline data has nothing to do with this. The modes of transportation covered by the index are truck, rail, air, and barge, as I pointed out in the text. And commodities such as oil are excluded from this index.

      “This decreases the need for oil tanker rail cars.” Commodities such as oil are excluded from this index.

      • Frederick says:

        Seems like everybody is grasping at straws trying to rationalize and deny reality Doesn’t it? The final stage is acceptance

        • Unamused says:

          Like the man said, you can’t handle the truth.

          The truth is such an ugly, ugly thing. That’s why it was decided to run the US on lies. Most people just pick their favorites and go with it.

    • Matthew Brandley says:

      I can show you video of the longest oil train in Washington st i have ever seen a friend of mine sent me on Twitter this afternoon. you have no clue what is really going on in Canada do you?

    • MC01 says:

      Data provided by the Panama Canal Authority (PCA) do not cover the US Western Coast-China traffic, but give a good measure of what is going on.
      In FY2019 coal shipments from the US Eastern Coast to “Eastern Asia” (meaning China, Japan and Korea roughly in that descending order of importance) stood at 14.5 million long tons, exactly where they stood in FY2018. Petroleum products (including LNG) shipped through the same routes increased 4.3% to an enormous 66.8 million long tons.
      Shipments of grains have remained stable at 24 million tons.

      So much for the much vaunted “trade war”, whose inexistant impact has been invented outright by governments and media worldwide to justify how the mother of all stimulus launched in 2016 has already run aground.

      On top of this we have to consider there’s a monster glut of energy products worldwide. US coal producers compete with Australia, Indonesia and South Africa for the once lucrative East Asian market and the LNG dream has turned into a nightmare: traditionally US NG producers have turned to the East Asian market (chiefly Japan) to unload their products at times when domestic prices were down.
      But these days everybody is selling LNG in Eastern Asia: Australia, Indonesia, Qatar… even Egypt. With the new mega-projects coming online over the next decade there’s little respite coming for LNG prices.

  6. WES says:

    Maybe shippers are being extra slow about paying their shipping invoices?

  7. Breta says:

    Doesn’t matter. The stock market ignores everything. Free money flooding in… (The crash will be epic!)

  8. Penny Wise says:

    How about extending these graphs out to cover the previous recession for comparison purposes?

    • Wolf Richter says:

      Penny Wise,

      If I took the charts back another six years: In the first chart, you would lose all the detail because each bar would be a hair. And that’s fine for some long-term studies. But here I’m looking at what is happening now and over the past two years, and I want to see the current detail. In the second chart, you would look at a huge pile of spaghetti frutti di mare.

      Also the last recession wasn’t a “recession,” but the Great Recession, a HUGE event, triggered by the Global Financial Crisis. I had never experienced such an event in my life, and I’ve been through lots of recessions. So the comparison will lead you to think that we’re not quite in the Global Financial Crisis yet. But that’s not very helpful because we’re not in a recession at all — this is a problem in the goods-based sector, particularly the industrial sector, with retail sales doing just fine thanks to booming ecommerce, and services, which are 70% of the economy, being pretty strong as well.

      • Shiloh1 says:

        Wolf, how will the major railcar lessors be affected? eg GATX, CIT, Wells Fargo railcar, etc. Thx.

        • MC01 says:

          Leasing is cyclical business, as in new companies enter the fray during periods of shrinking financial yields and low interest rates, followed by periods of consolidation when most of the newcomers throw the towel in or go bankrupt and when mergers and acquisitions become commonplace. It’s the nature of the beast.
          But the problem we have right now is we’ve had over a decade of shrinking yields and unless the grownups get back in charge things are bound to get a whole lot worse.

          I don’t know how railcars in the US are right now, but look at aircraft leasing.
          Avolon (#3 lessor worldwide by fleet size) was wholly bought and taken private by HNA Group back in 2016. Two years later HNA Group sold a 30% stake to Orix Corporation (a Japanese financial companies very close to Mitsubishi) for $2.2 billion.
          Now HNA Group will finally be nationalized de jure and all aircraft- and airline-related business will be sold off.
          Now the question is to whom and for what price: since Avolon is based in Ireland the Chinese government cannot simply hand 70% of Avolon over to one of their banks.
          GECAS (#1 lessor worldwide) has been caught in the financial catastrophe caused by Jeff Immelt. Under his enlightened leadership the once seemingly untouchable juggernaut lost an absolutely astonishing $11 billion in portfolio value in just six years. If you want an argument for bringing back death quartering, here it is. GE has been mulling to chop GECAS into bits and selling off the whole lot but GECAS is simply too critical for GE to be just sold off like that: regardless it will take years for GECAS to be either disposed of or restructured.

          I expect crazy stuff like this to become commonplace unfortunately.

      • nhz says:

        Interesting that you consider the Great Recession a HUGE event, because in Netherlands it was of very little significance for the real economy, just a blip on the radar screen.

        Periods like the (late) eighties with mass unemployment, high inflation etc. were much worse for the average person in my country. During the GFC all problems were quickly papered over, although many homeowners went under water with their mortgage (mostly thanks to starting out with mortgages way above 100%), almost no one was evicted and often they got better instead of worse mortgage terms when they couldn’t pay. In quite a few cases debts were forgiven while they kept the home. There was significant fallout in some industries like builders, architects, banking etc. (most of it deserved because of the preceding bubble) but life went on and most people hardly noticed. Most of the hardship fell on savers (negative real rates ever since), renters (huge rent increases while cost for buyers/owners went down, and totally dysfunctional housing market in general) and small business (no access to the free money that the big players got).

        For now it’s definitely not a recession either over here, it feels more like the party of 1999/2000. For the clueless things look better than ever thanks to all the free money sloshing around, if you are willing to take on debt.

        • Wolf Richter says:


          “Interesting that you consider the Great Recession a HUGE event, because in Netherlands it was of very little significance for the real economy…”

          Maybe you missed something back then.

          In the US, 11 million people lost their jobs, the unemployment rate – the way we measure it – more than doubled to 10% (which is catastrophic in the US). College grads (millennials) couldn’t get jobs. Business and personal bankruptcies skyrocketed. As auto sales collapsed by 45%, two of the big three US automakers and a bunch of component makers went bankrupt and laid off hundreds of thousands of people. The banking system was on the verge of collapse to where even big companies such as GE couldn’t borrow anymore to fund their regular payroll, and the Fed stepped in as lender of last resort so that workers who still had jobs could get paid. Yes, it hit the real economy very hard.

          I’m just surprised you’re surprised by this.

        • nhz says:

          I didn’t really miss that news but apparently the Great Recession (in the real economy) was very much a US issue then, while the financial crisis was very global. In Europe many banks went under or were taken over by governments etc., but the real economy was many times better than in e.g. the eighties.

          Maybe it was the other way round in the eighties?

        • Wolf Richter says:


          “…but apparently the Great Recession (in the real economy) was very much a US issue then…”

          OK, so here are some numbers for GDP declines in the year 2009:

          Netherlands -3.8%
          Germany -5.6%
          France – 2.9%
          Japan -5.4%

          You see, it was pretty bad globally.

          But I get your point, which applied in the US too: if you didn’t lose your job and if you didn’t get a pay-cut, then you were not in a recession. But if you lost your job, you were in a depression.

        • wkevinw says:

          The US has more of what they call “labor market flexibility”, which means it’s easier to lay people off and harder to get unemployment/public benefit support.

          I think the EU unemployment rate went from about 8% to 10% and the US rate doubled from 5% to 10%, so it was relatively big for the US.

          I think now the EU rate has climbed to about 12% (maybe old data), and the US is about 4%.

          That’s how the average person mostly experiences the economy.

        • nhz says:

          The Dutch unemployment rate was 4-5% in 2009, slightly higher than the +/- 4% it is now (some changes in way they count since then). Unemployment topped at ~8% around 2014, probably similar to other EU countries; very slow market response compared to US), that 8% is much lower than in the eighties (>> 10%) when whole industries went belly-up.

          It didn’t have any visible effects where I live, maybe because the GDP decline in Netherlands was mostly tied to import/export (Rotterdam harbor etc.) and finance/banking, two activities that are highly concentrated near the big cities far away from here. The local bankers that were fired all got huge parachutes, enough money to start a business or the equivalent of at least 3-5 years income for the average worker; no pity for them.

          The less flexible EU labor market is a factor for sure as wkevinw mentions. Also keep in mind that people who lose their job over here still keep close to full income for another 1-2 years and because of NIRP and very generous mortgage extensions many homeowners could survive for even longer without a job (more tough when you were renting). The job market has become far more flexible after 2009 so we have to see what happens in the next recession.

  9. Matthew Brandley says:

    Hi Wolf. Come April Norfolk Southern will be shutting down its heavy engine repair shop in Roanoke Virginia. All heavy engine repair will be done in Altoona. 65 jobs gone. yard to be remain open. reason. 42 pct drop in coal shipments in past 7 years .

    • sc7 says:

      Coal is dirty and inefficient, time to stop clinging to jobs we don’t need.

      • Cas127 says:

        “stop clinging to jobs”

        Thanks, AOC, plus the meth labs and oxy delivery svcs are already being set up in the abandoned mines…so the replacement jobs are rollin’ in…

      • Lisa_Hooker says:

        Coal is fuel and hydrocarbons for synthesis. Someone will use it.

  10. Ron says:

    looking at the Cass Freight Index volume for 2015 January volume the same as 2020? thats a huge drop in industrial shipments ! Hopefully I am looking at the chart incorrectly !

    • Endeavor says:

      Looks like an ‘old fashion recession’ with too much production industrially, with soon to be layoffs in associated areas. But producers are going to ignore Marx and sail ahead with monopoly pricing. Good luck with that.

  11. DR DOOM says:

    Since we are on the subject of shipping it seems appropriate to ask about how long will it take to receive my mug ? I mailed my check on the 14th. I will need the mug to medicate myself against white lies ahead. I hope shipping doesn’t go to heck in a straight line.

    • Wolf Richter says:

      DR DOOM,

      Thank you!

      “Mail” a check? Please be patient. Did you mail it to my media mogul headquarters as a donation? I’ll let you know via email when I get it, and I should get it pretty soon. But the 14th was a Friday, and Monday the 17th was a postal holiday. So Tuesday the 18th would have been overnight. Today is the 19th – the second day. So give the USPS a little bit of time to get this handled. They’ll get it done eventually :-]

      • VintageVNvet says:

        USPS might get it done eventually these days Wolf, but that was not the case a couple decades ago:
        Working in a small and relatively isolated town for a branch of a national company, after couple of years it went like this:
        If you wanted it there on time the next day, FX; if you wanted it there sometime the next day, big brown was OK too; if you wanted it there sometime or other, Airborne was cheaper; if you didn’t care if it got there, USPS…
        But, seriously, you might want to develop the delta between the China containers formerly going to USA West Coast, then trucked or shipped east, vs the increased number of containers now being shipped directly to USA East Coast ports; I believe a number of East coast ports have recently vastly increased their ability to handle both larger ships and much larger volumes of containers.
        Also, what about Buffett’s RR, BNSF? Seemed to me driving through the mid and far west last summer, we saw almost only their trains, and what looked like a lot of new infrastructure, especially multi-modal facilities.

    • Wolf Richter says:

      DR DOOM,

      Got your donation just now. THANK YOU!! Mug will ship out tomorrow. Cheers!

    • Wolf Richter says:

      DR DOOM,

      Trying to ship the mug to you. FedEx won’t ship without recipient’s phone number. I also sent an email with this request to your login email. Not sure if you get this email.

      Can you please email me your phone number:

      (along with your real name)


  12. Harvey Cotton says:

    With a freight recession, earnings recession, and manufacturing recession, it is a good thing we have had such ultra-low interest rates, QE, tax cuts, and trillion dollar federal deficits or we would be in trouble.

    Is this what greatness feels like?

    • Unamused says:

      Is this what greatness feels like?

      It would if you had more gullibility and vaseline.

      • Calvin Tompkins says:

        your earlier comment regarding ugly truth … powerful cynicism … impressive … my hat’s off Sir!

  13. Thomas Roberts says:

    I wonder if shrinkflation is a factor. Also better packaging could be in there as well. All the store closings. We’re possibility in a peak stuff era “i.e. most people have less enthusiasm for having a ton of stuff and buy less”, people switching to digital items “like streaming movies as opposed to DVD’s”. The continued rise of craigslist and second hand markets for large items like furniture. Overall probably mainly falling incomes and imminent recession.

    • Frederick says:

      The “secondhand” furniture is many times far superior to the new “ stuff” from my experience Just refinish and your good to go for another 30 years or more Most particleboard junk ends up in a landfill within ten years anyway

      • Thomas Roberts says:

        The quality of most new furniture varies by type. Beds can be cheap and last a long time “if bought online”. End tables and TV stands are cheaply made, usually, but can still last awhile, if you’re careful with them. Kitchen tables usually are not bad, but the chairs are very cheap. The big issue is couches and recliners, even expensive ones barely last a few years, if even that. Couches and recliners are criminally terrible quality, while still being expensive.

        • Lisa_Hooker says:

          It does depend. I saw a beautiful 3 piece sectional in the Merchandise Mart in Chicago I really liked. It was $22,000. I did not buy it. But the well to do and trust fund people do.

    • rhodium says:

      Well in a lot of these big and middling cities/metro areas you can’t afford the monthly payments on a house even with 20% down (which is a lot for most to save) so more and more people just rent small apartments. Where are you going to put stuff? So you just don’t buy it. Lack of space enforced frugality. Don’t worry, people are irresponsible and just find other ways to blow it, but where is that happening…

      • Lisa_Hooker says:

        Small apartment? Eat in restaurants at lot, take vacations often, buy more i-Stuff. The obvious tomorrow may not come.

  14. travis lewis says:

    Let me guess that all the original corona virus index shorts have been squeezed closed.

    Now China has a positive spin on virus control.
    Now ,when the news is positive, it is finally the time to go short.

    (Oh, you can talk the talk, but can you walk the walk?)

  15. Willy Winky says:

    Soon there will be nothing to ship.

    Choked off from suppliers, workers, and logistics networks, China’s manufacturing base is facing a multitude of unprecedented challenges, as coronavirus containment efforts hamper factories’ efforts to reopen.

    Many of those that have been granted permission to resume operations face critical shortages of staff, with huge swathes of China still under lockdown and some local workers afraid to leave their homes.

    Others cannot access the materials needed to make their products, and even if they could, the shutdown of shops and marketplaces around China means demand has been sapped.

    Those who manage to assail the challenges, meanwhile, have found that trucking, shipping and freight services are thin on the ground, as China’s famed logistical machine also struggles to find workers and navigate provincial border checkpoints that have popped up across the country

    “It really is death by a thousand cuts,” said John Evans, managing director of Tractus Asia, a company that has 20 years’ experience helping firms move to China, but which over the past two has had more enquiries from businesses looking to leave.

    “This is a black swan event and I don’t think we’ve seen anything like it in recent history, in terms of the economic and supply chain impact in China and across the globe.”

    The warehouses are thinning out. By the end of the month there will be shortages of parts. Retailers will start to be unable to restock shelves. Medicines will start to not be available. Pesticide and fertilizers will be running short.

    There is no way out of this. These workers are NOT going to return to the factories because they are AFRAID to return to the factories.

    • Brant Lee says:

      I’m sure the Chinese culture can weather this problem much better than the US ever could. Most of the Chinese are still poor and are not too far removed from generations of farmers and laborers like we are.
      I’m over 60 and I have never experienced empty store shelves, lack of supplies, even fuel in any sizable amount. Americans aren’t prepared for even a few days if cities had to be quarantined. Can you imagine fat-ass Americans living without fast food and restaurants while the only food at home is potato chips, soft drinks and fruit loops in short supply? As far as worrying about going back to work at the factories, we don’t have any.

      • nhz says:

        Agree, the Chinese still have some idea about the basics for life (maybe not the youngsters in the cities though?). Here in Europe within a few days people would be calling the local 911 and demand free food delivery or more likely a VIP helicopter service to the airport or a luxury hotel. Quarantine would be impossible as too many people only follow the rules when it suits them; there would be massive disregard for the law, riots at gas stations or grocery stores etc.

        Netherlands produces far more food than it consumes, but the food has to come from outside the big cities which are much like the US regarding stock and just-in-time delivery.

  16. Willy2 says:

    – Compared to previous years 2018 was an exceptional good year for the total volume of freight.
    – Yes, total freight volume in 2019 was lower than in 2018 but compared to other years 2019 seems to have been an “average year”. Nothing to worry about, at lest for the time being. But the weakness, the (fairly) deep dive in volume in the last 2 months of 2019 doesn’t bode well for the economy. And that was BEFORE the “Corona virus” scare had spread.
    – In one regard the Corona virus will throw the charts “into disarray”. It makes a comparison going forward much more difficult.

    • Willy2 says:

      – Correction: 2019 started out to be another good year like 2018. But as time progressed it became more and more like an “average year”.
      – Suggestion: take all the data from 2011 up to & including 2016 and calculate one “average year” that can be shown as one line.
      – If the start of 2020 goes below that”average year” line then that would be clear sign of more weakness in the (US) economy.

  17. Anthony says:

    Just to add to this , as I know cars are also made in the USA lol, but Jaguar in the UK says it only has two weeks of China made car parts left. So, production stops in fourteen days….It must be the same over with you and also in Germany…. Is it a tick tock moment??

    • MC01 says:

      JLR dealerships have so much inventory sitting idle they will still have some left when this blows over.
      Leaving the hordes of returning leases aside, JLR has an extremely serious overproduction issue they need to address right now, not in a decade. Dealers have been flooded with inventory and left to figure out a way to get rid of it, while at the same time turning a profit for all parts involved: there’s a good reason despite being backed by Tata JLR has a precarious financial situation to say the least.

    • Sammy Iyer says:

      From Bloomberg Quint:
      Tata Motors JLR -CEO Ralf Speth said the company has enough supplies to ensure production for the next two weeks, but from the third week onwards it remains risky and could even mean plant closures. “We have flown parts in suitcases just to make sure we have all the parts but for the third week, we still have parts missing,”
      JLR is the U.K.’s biggest carmaker with three factories.
      Tata Motors CEO &MD Guenter Butschek, in the U.K. for the official launch of the company’s new National Automotive Innovation Centre at the University of Warwick in Coventry, said the same scenario was playing out in the Tata Group firm’s Indian base.
      In India they have been “tracking and tracing” the situation on a very microscopic level to modify production.The complexity of supply chains means that even though parts may be available, the big challenge is getting them out of the region of Wuhan – the epicentre of the virus, which remains inaccessible.

      • Anthony says:

        I agree but it can’t just be Jaguar….when the production lines stop, only then will we really know how dependent on China is the Auto world….it could be bad or maybe it will all blow over…that’s the point we don’t know….but if I worked on a car production line I might feel a bit twitchy,,,

        • X-Pat DE says:

          I worked for JCB a lifetime ago.

          then they were very self-sufficient making and sourcing (local) parts.
          They were changing to JIT when I left for Germany (in 1991).
          As a commenter here as already correctly stated, the non-delivery of the smallest, most insignificant widgit can, and will, bring the entire production line to an immediate standstill if it can’t be locally sourced or manufactured.

    • roddy6667 says:

      The factories here in China went back to work yesterday. Only one shift, to start, and with less than a full staff. Every day will be a little better.

      • Anmol says:

        @roddy6667 Which city and which factory/s are you referring to ? I had an ebay order canceled as they cannot ship out. Even if the factory is opened, are nations accepting intl mail from China?

        remember that the virus can persist on a surface for upto 10 days (perhaps longer) – who will risk ordering a virus in the mail?

        • nhz says:

          please also avoid orders shipped from Japan, South Korea and some other Asian countries; and in a few weeks, most of the developed world if you want to be sure ;)

          Getting infected with CoV from a foreign package is extremely unlikely, unless you are ordering bat soup, pangolins etc.

        • Jm says:

          Just wipe the lackage an DC goods down with antibacterial hand cleaner, and clean your hands, too.
          And keep your hands clean!
          Get some hand cleanser wipes to take with you when you go out!

  18. Unamused says:

    It was the 14th month in a row of year-over-year declines

    If this wasn’t The Greatest Economy Ever the numbers would be even worse.

    People should enjoy the Good Times while they still can, because once they’re gone they’ll never come again.

    • Lisa_Hooker says:

      Thank you for a proper perspective. Like it or not “These are the Good Old Days.”

      • Unamused says:

        You’re welcome.

        Gather ye rose-buds while ye may,
        Old Time is still a-flying;
        And this same flower that smiles today
        Tomorrow will be dying.

  19. timbers says:

    Yet another perfect headline to give more reason for another all time Stock Market rally.

    Because headlines like these are like telling Wall Street:

    “We, the Fed, will give you yet moooooooore free money and and liquidity – as insurance and NOT QE, QE – that you can use to buy investments so it trickles down to The Little Peo…oh wait, we don’t care about TLP and no body cares that we don’t care abt TLP so why did I say that?…force of habit, please ignore that part.”

    No wonder there is such a disconnect between reality and stock and investment markets.

    • Bet says:

      One day the fed won’t matter to the markets. It cannot. One soon enough. There was no moral hazard in 2000. Now…. TSLA reminds me so much of INKT
      JDSU et al. Small caps bursting up like super novas because the money running downhill into garbage. No telling what will happen but the math says a return to the mean.

  20. Julian says:

    There’s little to be concerned about when I look at that first graph.

    2012-14. 24 months, mostly down. I remember 2012-14, they were very good years.

    2015-17. 21 months including 20 down months. More good years. The economy was going great guns throughout this period from my recollection.

    And now 14 months down! This is only the third worst downturn of the last decade and the other two occasions were in fact nothing to worry about whatsoever.

    Come back in a year and this short slowdown will be well behind us.

  21. Augusto says:

    Reduced economic activity everywhere and yet stock market up. Utter nonsense. Next they’ll be talking up V-shape recoveries and hockey stick bounces as the next reasons to buy. So predictable.

  22. Eferg says:

    Is this data really gloom and doom? I have a slightly different view, somewhat along the lines of Willy2 above. The chart that struck me as most significant is the monthly freight volume for 2011 – 2020. To my eye, 2018 and the first part of 2019 were the outliers. An unusual surge well above normal. I have heard some attribute it to avoiding the tariffs on China. Certainly plausible, but that determination is well above my pay grade.

    Since mid-2019 it looks like things are returning more to normal. Mathematics terms this “regression to the mean” – a very common phenomena. In fact, some overshoot on the down side would normally be expected.

    However, if you are in the freight business and became “addicted” to 2018’s level of business, then, yes, you are facing a disastrous recession. But it is a segment specific situation rather than a sign of a wider spread economic problem.

    As this site has well documented, there are many economic issues we are facing, but my gut tells me not to let confirmation bias extrapolate this data to the broader economy.

  23. Say It Aint So says:

    Wolf, what happened in 2017 to turn things around after the last freight recession?

    • Wolf Richter says:

      The last freight recession coincided with the lowest GDP growth (1.6% in 2016) since the Great Recession, and with the Great American Oil Bust, with a slowdown in other sectors including manufacturing and industrial production. By 2017, the price of oil was recovering. Also the tech sector went crazy at about that time. Lot’s of things moved. The “Trump Bump” was a near universal phenomenon even in San Francisco’s housing market.

  24. Willy Winky says:

    I’m being copied in by lawyers on the following topics:

    – would Force Majeure apply to this situation if a company wanted to dump its office space and get deposits back

    – would Force Majeure apply to contracts with factories in China that are unfulfilled and if so what are the implications

    All very fascinating I am sure (if you are a lawyer), however it is the equivalent of whistling past the graveyard.

    Given hundreds of millions of migrant workers (and even non-migrant workers) are not showing up for work because they are scared (would I show up for work in Wuhan – nope!) then if my factory doesn’t deliver that means a LOT of factories are not delivering.

    And the last think I am going to be concerned about is suing the factory.

    I suppose what I am thinking is so unthinkable to these people so their cognitive dissonance kicks in, they continue with business as usual.

    Otherwise they would go insane.

    People truly do NOT want the truth. They cannot handle the truth.

    That’s why they believe the soothing PR that is coming out of China that suggests the worst is past us.

    Here is the truth – can you handle it?

    “Our key suppliers are terrified. Even workers within the province aren’t willing to go out and go to work, people are really scared,” he said, referring to fears of becoming infected with the virus. “People are still choosing to stay at home.”

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