Solving the economic puzzle takes more than a few pieces
April 15, 2013
As much as any time as ever during the depths of the recession and subsequent recovery, there continues to be a plethora of mixed signals regarding the state of the economy.
For example, gas prices are declining, which is good, and so are retail sales, which is bad. But the most recent edition of the Cass Freight Index report showed gains in volumes and freight expenditures, which showed gains over previous months. And while manufacturing is doing OK, New Orders, which are commonly referred to as the engine that drives manufacturing, have declined more than a cumulative ten percent in the last two months.
If that last trend, especially were to continue, that would not be good for the overall economy or the freight economy, as “Slower growth in manufacturing equals less freight in various stages of the supply chain,” noted Rosalyn Wilson, senior business analyst with Delcan Corporation and author of the annual CSCMP State of Logistics report, in her analysis of Cass report.
We hear—and see—that things are moving along in the freight world as they typically and traditionally would in terms of seasonality. But we have heard this tune before, if I am not mistaken.
That tune goes along the lines of “things are shaping up pretty well so far here in the first half of the year, looking at volumes and inventory levels.” Then, as things have been the case in recent years, things are no longer as good, with drop-offs in demand and a somewhat general flat-lining of subsequent economic activity. It is too soon if the tune will be the same in 2013, but the case can already be made, given the relatively sluggish pace of retail sales and the uneven employment outlook, which changes quickly depending on a few tenths of a percentage point in the monthly jobs report we see every month.
When I first started covering this industry, I was continually told that how the freight transportation market goes is how the overall economy goes. In some instances, this sentiment still holds some weight, but in others it is not nearly as prescient, it seems.
Looking at it through this lens can lead—in equal parts—to both confusion and clarity, depending on what you are looking at and, more importantly, how the story behind the data is being told, too.
For example, in its most recent earnings announcement, FedEx said it is reducing air capacity into and out of Asia, due to reduced demand in that region, coupled with shippers trading down in modes for more affordable freight rates.
And looking at rail and intermodal data, one can tell that modal trade down—in this case to intermodal—is alive and well, given how the annual increases we are seeing year-to-date on that front. Of course, we need to remember part of the intermodal story is due to increased movements via containers and less in trailers.
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