2012 Peak Season prospects are mixed, according to LM survey data

While it is no secret that there has not been a Peak Season—in the traditional sense—for a number of years, gauging how things will turn out in 2012 is challenging, given the ongoing economic challenges that have been occurring.

These challenges are nothing new for the most part, with relatively low retail sales growth, fluctuating fuel prices, fairly high unemployment, minimal GDP growth, and, perhaps most relevant, the significantly lower inventory levels today compared to the Peak Season build-up in recent years, which was the case in the first half of 2010 and to an extent in 2011.

As these things have been occurring, freight volumes and activity remain in a holding pattern, with flat or low growth throughout the majority of domestic and global freight transportation modes with the mid-year point fast approaching.

Being in a holding pattern does not really translate into growth or positive Peak Season prospects, but as been the case since 2007, attitudes and outlooks are decidedly mixed when gauging 2012 Peak Season prospects. This was a major takeaway in the findings of a Logistics Management readership survey, which found that 40 percent—or 89 of the nearly 240 respondents—expect a more active Peak Season this year compared to last year, with 46 percent—or 102 respondents—expect it to be the same as last year, with 14 percent—or 32 respondents—expecting it to be less active.

With such a mixed outlook on what might be in store for shippers this year, Peak Season outlooks provided by shippers were quite telling.

Shippers expecting a more active Peak Season pointed to an expected increase in holiday spending, coupled with what some described as gradually improving economic conditions. This contention is supported by data put out earlier this year by the National Retail Federation, which is calling for 2012 retail sales to hit $2.53 trillion, a 3.4 percent annual increase.

But not everyone feels the same way.

“The economy is still soft, and retailers are shipping earlier in the year at a slower pace and volume amount,” said a respondent. “China exports are declining, and there is still extra ocean capacity.”

Other reasons for a flat or less active Peak Season included things like economic uncertainty around commodity costs, the troubled economic situation in Europe, and currency movements—all things which have the potential to delay placing purchase orders until later than usual.  

But another factor potentially leading to a quelled Peak Season cited by shippers is the ostensibly rapid pace in which ocean carriers have raised rates in an attempt to get back the money they lost in 2011. A food importer and exporter told LM he has received six rate increases from ocean carriers since January, which makes it difficult for his company to repeatedly pass onto customers.

Even with rate pressure and an uneven economy, some experts are calling for solid Peak Season activity. The Port Tracker report by the NRF and Hackett Associates expects retail-based import cargo to the U.S. in August, September, and October to be 7.3 percent, 9 percent, and 19.2 percent, respectively, on an annual basis.

“Our view is that there will be a Peak Season,” Hackett said. “It won’t be a big, huge boom, but looking at some of the forward indicators July and August should be relatively good from a freight point of view, and there are good production figures in China, despite the Chinese economy having slowed down somewhat. Things, overall, should be pretty decent. And importers, wholesalers, and retailers are managing their inventory pretty closely, but with the level of service carriers are providing they can plan pretty well ahead and don’t need to build up too much inventory, as much as they need to keep re-supplying.”

Werner Enterprises President and COO Derek Leathers was a bit more guarded than Hackett in assessing what may be in store for Peak Season.

“It is hard to say for sure, but I think we would be feeling it already if there was a real pull forward or an inventory re-build happening,” he said. “We don’t have the pent-up demand carryover from the first quarter to the second quarter like we did last year, and this feels like a normal second quarter, with things pretty good but not great either. This would lead one to believe, if you couple it with supply leaving and demand increasing, we should be staring at a somewhat robust second and third quarter. But it is still too early to say for certain.”