A theme within freight transportation, supply chain, and logistics circles, which is always among the key “top of mind” themes, is the state of the economy, from various perspectives, whether it be, in our case, a freight or macroeconomic perspective.
It is hard for me to forget that back when I started writing for this magazine back in 2005 that the mantra, or thesis, that the freight economy is an early indicator for the overall, or macroeconomy, was essentially drilled into my mind. That was a big lesson for me, especially at that time, as I was pouring over tonnage and volume reports across various modes of freight transportation, public company earnings reports, and, of course, more “general” economic indicators, such as retail sales, manufacturing and services economy data, housing, commodities, and a whole host of others, too, like inflation, inventories, and energy prices, of course,
Not to be lost in this shuffle, of course, is perhaps one of the biggest economic “tells,” that being GDP. GDP, like all of these indicators, tells us what has happened and where things are, more or less, at a given period of time. That said the advance first quarter 2023 estimate, which was issued yesterday by the United States Department of Commerce’s Bureau of Economic Analysis (BEA), came in a 1.1%, following a fourth quarter real GDP increase of 2.6%.
BEA explained that, from the fourth quarter to the first quarter, “the deceleration in real GDP in the first quarter primarily reflected a downturn in private inventory investment and a slowdown in nonresidential fixed investment. These movements were partly offset by an acceleration in consumer spending, an upturn in exports, and a smaller decrease in residential fixed investment. Imports turned up.”
This is where things somewhat contrast with sentiment from within freight and logistics circles. For example, BEA points to an uptick in consumer spending, but as many stakeholders will tell you, that uptick is not being largely spent on actual tangible goods, but, instead, that money is being spent on services, with BEA pointing to health care, food services, and accommodations.
While health care is not surprisingly part of the mix, the other two categories, as well as things like going to pubs and bars, travel, sporting events, movies, concerts, and the theater, in the wake of the pandemic, are all clearly digging into goods spending—for the items that move on our roads and railways and over the water. That is well-known and well-established. But what is notable here is to the degree in which that situation has been elevated.
To be sure, that has been on display in myriad forms of data, analysis, and research, many of which share the common theme of how lower demand, still-high inventories, and inflation all continue to eat into consumer goods spending, which, as we all know, represents 70% of all economic activity, or somewhere within that range.
We also see how U.S.-bound imports have been on the decline for a long period, due to many of the aforementioned factors. There is also the fact that many economists and industry stakeholders maintain we are in a recession, or a freight recession, already. Is that “official?” I guess it depends on whom you ask. But, let’s not kid ourselves, a lot of the data indicates that could very well be the case.
So, going forward, there is a lot to monitor and keep an eye on. I also just realized I forgot to mention the still-high interest rates impacting things. Mortgage rates are still eye-popping, especially when compared to pre-pandemic levels, no doubt.
Looking ahead, things remain in a holding pattern, of sorts, with many mixed signals out there. Freight transportation and logistics trends, themes, and data all remain key pieces of trying to solve the puzzle that is our economy. Not all of the pieces seem to fit perfectly, though, but that is nothing new.