They’re getting passed on and feed into the inflation scenario.
By Wolf Richter for WOLF STREET.
Before we get to the spiking prices and expenditures that shippers such as industrial companies or retailers now have to pay to ship their goods across the US, I want to point at the volume of shipments.
Shipment volume in June was strong but down from peak year 2018, and has been lower than the peak year 2018 every month this year, according to the Cass Freight Index, which covers all modes of transportation, but is centered on trucking, with truckload (TL) shipments representing over half of the dollar amounts, rail in second place, and less-than-truckload (LTL) shipments in third place, followed by parcel services and others. But it does not include bulk commodities.
The Cass Freight Index for shipments in June (red line) was up 4.2% from June 2019 (gray line), but was down 1.3% from June 2018 (black line). Some demand may be backing off as the impact of stimulus spending is fading, after the historic spike of retail sales earlier this year. But there are also numerous signs that the transportation industry is straining to meet demand from shippers, amid widespread complaints about longer delivery times, and about equipment and driver shortages.
There has been enormous need for transportation, driven by the stimulus-fed spike in consumer spending on goods, and it is strained transportation capacity. And freight rates have shot higher, particularly in trucking.
According to the Cass Freight Index for Expenditures, the total amount these shippers spent in June on shipping goods to their customers in the US – despite the less than record volume – spiked by 11% from May, by 56% from June 2020, and by 28% from June 2019:
The freight rates embedded in the components of the Cass indexes jumped by 11% in June from May, and by 23% year-over-year.
Trucking strains as rates soar.
The average national spot rate for van-type trailers has been rising for the past 12 months and in June reached $2.67 a mile, up 47% year-over-year, according to DAT Freight & Analysis. The average national contract rate for vans jumped by 36% year-over-year, to $2.73 per mile.
The average national spot rate for flatbed trailers (hauling heavy equipment, construction materials, and the like) jumped by 52% year-over-year to $3.15 per mile. The contract rate jumped 29% year-over-year to $3.12 a mile.
Diesel prices jump.
At the end of June, the average price of diesel at the pump reached $3.33, up 37% year-over-year, but it still remains far below the $4 range in 2012 through 2014:
Transportation costs are getting passed on and feed into the broader inflation scenario. The scenario here is paralleled by the ocean freight industry. For example, average spot rates from Shanghai to Los Angeles have spiked from around $1,500 per 40-foot container in early 2020, to nearly $10,000 now, as Container Freight Rates Spike to New Extremes, with Worse Still Ahead
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People need to stop buying useless junk
That would shut down both Amazon and the Chinese economy.
Hey, let’s not judge the people with 21 Amazon boxes set out on trash day. Some of us just switched from Target and Walmart to Amazon because it was easier during COVID and remains easier today. Not to mention 5% cash back.
No doubt people see our trash and wonder where they can get somma dat stimmie.
if we didn’t have to buy said JUNK from overseas/china/mexico
then and only then do we have chance
wait til they refuse to take our currency as PAYMENT
that’ll stop junk coming in
It would actually pretty awesome if we could transfer much of our production from China to Mexico.
They re too eager to buy foam foundations on mud for millions. Cause silly shills have covered everything in sewage. Toilet paper inflation screams on the crisis screens so WOLF can reiterate. Got to capitalize on the clean up for bud heavy, human extraction following the nightly news, just like Katrina! it all looks like hell in 4K, so increase gdp by also focusing in on our snot. Welcome to con-vid 2020! Get your butt-investor-crack-coin here!!!!
Transitory or not transitory … the only real question is what level will make the Fed do a fake attempt at raising rates. We all know that they can’t really and if the try even a little bit the market falls and then they have their excuse for cutting and “supporting” again.
I wonder if that is why long bond prices have stayed down because they know that there is no scenario where the Fed goes on a real tightening spree…it’s just how far they will get before reversing again and brining us even more QE and lower rates. The only certain thing really is that at some point QE will be bigger than it is now….probably not too long either.
Kinda surprising that we are under 2018 levels.
The Fed is doing everything it can to protect employment, to the point it excludes other concerns such as high inflation, wealth concentration, transparency, etc.
Forgive the analogy, but it reminds me of the early days when plantation owners didn’t want any worker to remain idle. Today, they don’t use chains and cuffs to enforce productivity. They straddle you with debt, make you pay the master’s taxes, increase the price of investment, and repress your ability to save capital. In other words, working on the plantation becomes your best and only option.
How did THEY saddle you (individually) with debt? I’m pretty sure debt is voluntary for most people.
Are you really asking that question?
How about US government debt, which is growing at $3T per year…. the ultimate WTF chart. If you are one of the 140 million households, your share of the annual debt increase is about $21k per year, every year. If you are one of the households that actually pays income tax, your annual debt burden is at least twice that…annually.
And don’t worry. If you work hard enough, cut your oatmeal intake, and get more mileage out of that old pair of shoes, you still might have a little left over to pay for those mortgage bailouts, pension bailouts, and other systematic financial instabilities coming your way.
Individual debt is voluntary. I thought you were making a claim that student debt is somehow coereced. Collectively, yes you are absolutely right.
Is it any councilation that it’s you are saddled with interest-only loan at 0% APR ad infitum? You are unlikely to live ad infitum
Nonsense. Employment might be the stated reason, but it’s not the real reason. They know at this point that interest rates and liquidity have nothing to do with employment. it doesn’t matter how cheaply you can borrow, you’re not going to borrow money to employ people unless you need those employees. It’s that simple.
Wage slave, debt slave, healthcare slave, etc….there are many ways not for the wealthy and corporate America to get the bottom 99% to do their bidding from cradle to grave. Problem is, some of those folks are catching on after getting 3 months of complete freedom in March 2020…and this scares the corporations and wealthy as their entire “Gods on Earth” lifestyle construct depends on citizen ignorance of reality. Question remains….How much longer can billionaires sell $28 million dollar tickets for a few seconds in space, using the carbon footprint of 278 average humans for an entire year stuck on Earth (per Forbes), without causing a global social revolution? I’m not seeing people cheering for the super wealthy anymore as idols of the best of humanity, are you??? The billionaire class is burning Rome and don’t even realize it yet…
For example, billionaire Blackrock CEO Larry Fink (net worth $1.2 Billion) has a solution for the bottom 99% via a CNBC article today, titled (only a narcissistic billionaire “baron” would think it wise to command the “peasants” to work till death):
You may need to work longer, ramp up investment risk to afford retirement, BlackRock CEO Fink says
“Unquestionably, as central banks keep rates low, or negative in Europe, the savers are getting slammed,” BlackRock’s Larry Fink told CNBC on Wednesday.
People “may have to work longer because they’re not earning the same returns on their savings,” Fink added.
The Fed has been saying that they needed to run inflation a little hot since inflation ran a little low the last while. By my math they have now achieved inflation at 2% for more than the last decade. Any additional readings mean they are exceeding their stayed target of symetrical 2%.
Most of the major freight haulers HQ in the midwest, COVID country. This new surge is hitting everyone hard, vaccinated people are catching the delta variant. CA is going back to masks, and not even the fall virus season. This is shortage induced inflation, look no further.
Oh no! Covid is gonna get us all! Lol
I am vaccinated along with everyone in my extended family. None of us have gotten the delta variant even though it is all around us.
No one in my family or extended family (locally) got the vaccine. Earlier we all got covid and it was fine. For all but one it was easier than influenza. No one was anywhere near needing more than rest. And now being naturally immune, we don’t need the vaccine. And anyone stating otherwise is misinformed.
Unless you have had your antibodies tested you should consider yourself open to infection.
Give it time, the Delta may not get you, but Delta+ will, or epsilon, or lamda, a long way to go through the Greek alphabets.
Quick, where is the media camped out in front of the hospitals and morgues, we need 24 hour coverage now.
Pfizer need to move things along with the boosters or we are all going to die. At least it needs to be done in a fashion that boosts Pfizer stock, it hasn’t done shit in the last year.
I’ve been reading every NYT Covid story in recent months including study results from vaccine producers.
My understanding is that 99% of new cases are those who are unvaccinated. Vaccinated people in the US are not getting the delta variant unless you are referring to rare edge cases.
If vaccinated Americans were getting the delta variant it would probably be headline news…I’m not seeing those headlines.
Right, everything is in the news, if your paid actors don’t tell you it’s happening… Wait. they haven’t told you about the massive inflation under Biden’s money printing FED but you’re here… Strange! Doesn’t this go against everything you’re fed? Strange!
Brain disentanglement: the correct term is “Trump’s money-printing Fed.” Powell is Trump’s man at the Fed. And this whole circus started in March 2020, under Trump.
Just commenting.. Take your schtick back to Breitbart where it belongs.
The NYT is known for a lot of Fake news. But even a stopped clock is right twice a day. I’d like to hear from another source.
Dr Seigal, from NYU, said the 2 dose vaccines protect you against the Delta variant.
Stop with the disinformation about the Delta variant. Nothing you said it true.
Right!? Maybe Wolf has a better explanation but I thought that long bonds and things like TLT would be going down while buying into the narrative of higher rates even though we “know” it won’t last. Maybe the market knows though.
It’s hard to tell what the overall market is thinking when you have the Fed actively participating in said “market”.
I think the reality now for investors is their success is mostly going to be determined by the Fed and Congress.
Easy solution is to keep stealing from the prudent, but the prudent will just spend less or move assets out of system
One solution is to return to a situation similar to the early 18oo’s when traveling craftsmen would show up at your homestead once a year to mend or make new things from their specialties. Before widespread railroads or canals transporting anything was very expensive. So the cobbler would show up and make everyone in the family a new pair of shoes, or the tinsmith would make new pots, or mend the old ones. The Housewright would arrive with his chest of tools and build you a new house from local materials.
Only change is manpower. Volumes are not above 2018, diesel prices are up but not above previous rates. Equipment has not been taken out of service. Stop paying people to stay home and they will return to driving trucks. Problem solved.
When bond market corrects itself Watch out won’t be feds fault pass the worthless buck
There are no “markets” as we used to know them. Whatever is left, is fully manipulated by Fed and Treasury actions in front of and behind the scenes.
Interest rates can’t go up materially. For a number of obvious reasons. The main one that people overlook is the overabundance of dollars sloshing around the world. Those dollars have to go somewhere.
The Fed is masterfully achieving some real inflation in the economy by springboarding off the COVID slowdown. Remember, they want inflation and lots of it; particularly if they have a government that is willing to support the underclass (bottom 90% these days) with supplements to help them weather all the price increases and to push for higher wages.
Look for another multi-trillion spending bill pushed through Congress by Biden and the slim Democratic majority.
Not all of these price increases will stick fully (most won’t) but they won’t fall back to pre-COVID either. The whole process is quite fluid now and particularly if oil spikes from OPEC disagreement.
CRAK, the oil refiners ETF, osc inside Jan/ Feb 2018 BC/ AR, between : 32.27 and 27.86.
CRAK looks tired, need some rest, before breaching Oct 2018 high @36.19.
Saudi Arabia has been burning oil products to generate electricity. They exhausted much of their known natural gas reserves years ago.
Things have changed. They acquired fracking technology and started drilling carbonaceous shale rock and fracked the rock to release natural gas. Saudi Arabia might become a top five natural gas producer within ten years. This might allow the export of more oil or diesel.
Hopefully with no market for it as countries stop importing and making things that use it.
You mean stop making all things plastic? Good luck with that.
I guess we are going back to when everything was made out of wood and earthen products.
The rich man worries about climate change. The poor man worries about paying his hearing bill so he doesn’t freeze to death.
They better get those self driving, eighteen wheel golf carts, on the interstate and soon.
Gotta be some people in the machine making a lot of money, very quickly, from such a spike. Putting a smart little Machiavellian brain to work. I’ve read that a person needs a cast iron stomach, and a handy supply of Rolaids or Tums, to handle the market trade game, year after year, and stay in it.
Been watching all the stuff I can on financial calamities. Nearly all have one thing in common. People borrowed too much money and when bad times came couldn’t make their payments.
It happened to Wall Street in GFC but government let them off the hook except threw taxpayer a bone with letting Lehman go under. Wall Street has Congress captured. Going to happen again, very soon most likely.
As a small chemical manufacture, I see both LTL freight and UPS Ground delivery times take up to an additional five business days to deliver. A couple of the areas where it takes several extra days to deliver a pallet is Chicago and Miami.
UPS drops an empty Ground trailer off each morning and picks it up in the afternoon. The local driver takes it 35 miles to the hub, where it gets emptied and refilled overnight. He brings the same trailer back every day.
A few weeks ago, every box on the trailer showed a shipping label had been created, but the packages never moved through the system. Then, five days later, they started moving after some stern emails.
One of our local drivers said the facility is so slammed, they unloaded the trailer, shoved the packages into a corner of the warehouse, and left them for days. Meanwhile, our products aren’t being delivered on time, so we have to refund payments.
As a hobby I sell books on Ebay — a lot of fun. But as a rule now, every book is arrives late, no matter how sent.
UPS recently delivered my stuff to a neighbor who has a private drive with their street number at the entrance and their last name on the house. I wonder if UPS or Amzn has to pay for that mistake. I’ve decided I don’t care, tired of chasing down my deliveries.
I sent something over a thousand miles away recently with USPS Priority. It took less than 2 days to deliver! They were really bad during the pandemic but must be improving.
UPS and FedEx have GPS that allows them to know if they are at the correct address. They don’t even need house numbers, but packages still get dropped at the wrong house. When a package gets placed on my doorstep the driver takes a photo of it with the door in the background. This gets emailed to me. Hard to screw up, but they still do.
Small builder in our neighborhood just can’t seem to get the latest home finished. It’s taken at least 3 extra months for him to build this house than the last one in the neighborhood. Shortages of materials and labor I think.
JP underWater, side to side smiles in front of the crowd, joke with the rep. it’s first in 3.5 yrs., looks relax & relief, perhaps
because he is transitory.
After watching “The Power Of Fed” last night it’s pretty clear what’s going on here and following the logic, inflation (and steps towards hyperinflation appears to be the ultimate result, although I just can’t imagine hyperinflation becoming a reality). In the numerous clips of Kashkari answering direct questions they feel the economy will completely collapse if the spigot is cut off. When pressed he explains that unless regulatory controls are instituted there is no way out. As RightNYer repeatedly points out we don’t really make anything any more. Its an economy that skims profits off what others make. And this is what Americans consider “wealth”
Did you take notice that nowhere in that one hour program was a word spoken about the FED’s program of low (or zero) interest rates causing retirees/old folks on fixed incomes being led to the slaughter house? No mention of high or transitory inflation affecting that group either.
Re: old folks
That’s where the money is. If the Fed needs money that’s who they have to attack. This is one of the important reasons for ZIRP. And since ZIRP has been in effect ever since the Obama administration the Fed must need money real bad. It’s a shame I’m one of those old folks.
Jeremy Grantham quote about “the three great asset classes [housing, stocks, bonds]” being in bubble territory was really all I took away from the show, didn’t seem too in-depth or intellectual. My suspicions were proven when the host brought up “equality” a couple times at the end.
I watched a former central banker basically say the Fed did it to themselves. Once they started solving every problem with easy money they eventually dug a hole they probably can’t extract themselves from.
Unlike 08, this time around we hiked our rates,
and will continue the increases. No debt, no slackers,
no worries on how high the green crew will push fuel prices.
Let’s keep in mind September and October are the worst two months of the year. This implies its a traditional weak period. Is this the straw that breaks the camel’s back? I don’t know. But it’s only two months away so I’m being very cautious.
Listen folks – as a 25 year industry insider we need your kids and grandkids to get behind the wheel of a long haul truck / 18 wheeler asap. We need them in flatbed horribly bad and we will take them to drive a van for both longhaul and peddle runs around the area. They will make solid money – $60K and up to $100K or more. Now here is the hard part…. they have to work hard and they have to be on the road for weeks at a time.
We need drivers NOW. Marine drayage also… I can’t get containers moved out of CHS and SAV or POLB as we don’t have enough drivers. We also need chassis badly at every rail head and every CY port facility.
Airports need cargo handlers too. So shake them out of their beds before 8am and tear off their Playstation headsets and tell those little punks to get their butts to work.
Yeah, such an incentive for young people to get out of bed and go to work, when houses cost 20x the average income in many places!
All to protect the values of the paid off houses of their boomer parents.
In the times of financial chaos we are now ,NO Guarantees houses or savings can keep their value.And why millenials or gen Z must be deprived of their labor to keep greedy and entitled boomers happy.It is not going to happen within 10 years.
I have a friend who loads and unloads planes in Phx. When it 114F outside, it’s 140 in the tarmac. They work in 40 minute shifts outside and 15 minutes in the a/c.
It’s hard, hot, draining work. The pay is $16. hr.
We need to return to cargo by rail, is what we need. I don’t know all the details but I read there was some funny business with getting the railroads regulated out of the cargo business. Yeah, cuz it’s SO much better to clog roads with belching behemoths. The cost to deliver by rail insanely less than by truck.
Railroads are alive and well, doing a huge amount of cargo business. They even transport truck trailers and containers (intermodal).
Believe that the creation of the Interstate highway system/low diesel costs made less than breakbulk-level transport/delivery by truck more affordable for business by/and reducing delivery times to consumers. (Note the disappearance of countless local ‘short lines’ during and subsequent to the construction/completion of the IHS…).
The development of intermodal was a successful effort for the rail companies bottom line, allowing them to drop/dismantle/sell off the many ‘local’ routes that had become unprofitable…
as always,am willing to be more informed/corrected on my perception!
may we all find a better day.
Well my son has his CDL now, but he isn’t 21 yet. So he can’t drive across state lines. That happens in October.
Solid year of work experience with a local garage out of high school. (Tried college, but it didn’t take.) No smoking, no drugs, no tats. Good judgement. Be interesting to see how he fares.
Always be more than a one trick
Pony. Sounds like he can use his hands. Get him started acquiring rental homes.
BTO Stay Awake All Night.
In the cool cool cool of the ev’ning
I’m hitched up and ready to ride
In the cool cool cool of the ev’ning
I’m hitched up and ready to ride
Gonna truck all night
(Gonna truck all night)
Gonna truck all night night long
(Gonna truck all night)
Gonna truck all night
(Gonna truck all night)
Gonna truck all night night long
(Gonna truck all night)
Stayed awake all night