Tag Archives: Freight

Recession Watch: US Freight Drops to Worst Level since 2010, “Excess of Capacity” Crushes Rates, by Wolf Richter

Posted on September 21, 2016 | 2 comments

While it is not yet official that the entire US economy is in a recession, the freight transport sector certainly is. From Wolf Richter at wolfstreet.com:

“Overall shipment volumes are persistently weak.”

When FedEx announced its quarterly earnings today, it included some telling tidbits. In its largest segment, FedEx Express, domestic shipping volume edged up merely 1%. In its smaller FedEx Ground Segment, shipping volume jumped 10%, “driven by e-commerce and commercial package growth.”

Sales by e-commerce retailers jumped 15.8% year-over-year in the second quarter, according to the Census Bureau, and companies involved in getting the packages to consumers and businesses have seen growth in those segments. For the rest, not so much – as the goods-based economy is getting bogged down.

And this has been showing up in broader shipping data. The Cass Freight Index for August, released today, fell 1.1% from a year ago, to 1.115, the worst August since 2010! The 18th month in a row of year-over-year declines!

“Overall shipment volumes (and pricing) are persistently weak, with increased levels of volatility as all levels of the supply chain (manufacturing, wholesale, retail) continue to try and work down inventory levels,” Donald Broughton, Chief Market Strategist at Avondale Partners, wrote in the report.

The Cass Freight Index is based on “more than $26 billion” in annual freight transactions by “hundreds of large shippers,” according to Cass Transportation. It does not cover bulk commodities, such as oil and coal but is focused on consumer packaged goods, food, automotive, chemical, OEM, and heavy equipment.

It’s not seasonally adjusted, so it shows strong seasonal patterns. In the chart below, the red line with black markers is for 2016. The multi-color spaghetti above it represents the years 2011 through 2015. So here’s how dismal the “economic recovery” has looked in 2016 so far:

The report pointed out the growth in e-commerce – the one aspects of the goods-producing economy that is hopping. But it also said that the transit modes servicing the auto and the housing/construction sectors were weak. Both sectors are crucial to the US economy.

And rail, as has been the case recently, caught the brunt of it. According to the Association of American Railroads carload traffic – which includes commodities such as oil and coal – fell 6.6% in August from a year ago, and intermodal traffic (containers and trailers), fell 4.8%.

The tonnage shipped by truck rose 2.6% on a three-month moving average basis. But truckload volume fell 3.5% in July, leaving the three-month moving average down 1.6%, according to Broughton. “No matter how it is measured, the data coming out of the trucking industry has been both volatile and uninspiring,” he says.

Trucking in “mixed” condition – tonnage up, load volume down – and railroads in the tank: hence the worst read in the freight sector since 2010,

Plenty of culprits. Weak demand is in part caused by inventories that had been rising so sharply, starting in 2014, that the all-important inventory-to-sales ratio reached Lehman crisis levels (my chart for June). Recently, businesses have been trying to whittle down their inventory levels by reducing orders, and this is impacting the freight sector. Given that inventories remain at very high levels, and the inventory-to-sales ratio at crisis levels, both the high inventory levels and the draw-downs, along with their impact on freight, are likely to continue.

To continue reading: Recession Watch: US Freight Drops to Worst Level since 2010, “Excess of Capacity” Crushes Rates

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US Freight Drops to Worst May since 2010, by Wolf Richter

Posted on June 21, 2016 | Leave a comment

The goods-hauling part of the transportation sector keeps sinking. From Wolf Richter at wolfstreet.com:

Goods economy sinks, drags down trucking & railroads.

“May is usually a relatively strong month for freight shipments, but given the high inventories with ever slower turnover rates and the decline in new production orders, May could be another soft month,” predicted Rosalyn Wilson at Cass Transportation a month ago. It has now come to pass – only worse.

Freight shipments by truck and rail in the US, excluding commodities, fell 5.8% in May 2016 from the already anemic levels in May 2015, and 7.0% from May 2014, according to the Cass Freight Index, released today. It was the worst May since 2010.

“This year we have failed to see the robust growth in shipments that we expect to see this time of year,” Wilson lamented.

In fact, aggregate shipment volume over the first five months, according to the index, was the worst since 2010. And freight is one of the most reliable gauges of the goods-producing economy.

The Cass Freight Index is based on “more than $26 billion” in annual freight transactions by “hundreds of large shippers,” according to Cass Transportation. It does not cover bulk commodities, such as oil and coal and thus is not impacted by diminished oil-train activity and collapsed coal shipments. The index is focused on consumer packaged goods, food, automotive, chemical, OEM, heavy equipment, and retail.

The Index is not seasonally or otherwise adjusted, so it shows strong seasonal patterns. In the chart below, the red line with black markers is for 2016. The colorful spaghetti above that line represents the years 2011 through 2015. The only month this year that was not the worst month since 2010 was February; only February 2011 was worse. That’s how bad it has gotten in the Freight sector:

“Truck tonnage continues to slide for both linehaul and spot markets,” according to the report. And railroads are also singing the blues.

The Association of American Railroads (AAR) reported earlier that May carloads, which include commodities, had plunged 10.3% year-over-year, while containers and trailers had dropped 3.3%, for a combined decline of 6.8%.

“Most economists think the economy has picked up in the second quarter from the dismal 0.8% growth in the first quarter, but so far railroads aren’t seeing much of it,” said AAR Senior Vice President of Policy and Economics John Gray when commenting on the dismal report.

“A variety of environmental and market forces continue to punish coal, and high business inventory levels and excess truck capacity, among other things, are pressuring rail intermodal volumes,” he said, blaming in part competition from desperate truckers for the railroads travails.

In the Cass Freight Index report, Wilson worries about the “volatile” economic outlook: “What is perceived as a strong sign one week often looks like a sign of economic weakness the next,” she said. “The global economy is facing many unsettling influences, such as Britain’s possible exit from the EU, China’s economic woes and currency problems, and oil prices.”

This “volatile” outlook and the “unsettling influences” impact the dollars and cents of the freight sector.

To continue reading: US Freight Drops to Worst May since 2010

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Rail Traffic Depression: 292 Union Pacific Engines Are Sitting In The Arizona Desert Doing Nothing, by

Posted on May 11, 2016 | Leave a comment

If you go look out in the real economy, as opposed to the Wall Street and Washington fantasy economy, you’ll swear you see a recession. from Michael Snyder at theeconomiccollapse.blog:

We continue to get more evidence that the U.S. economy has entered a major downturn. Just last week, I wrote about how U.S. GDP growth numbers have been declining for three quarters in a row, and previously I wrote about how corporate defaults have surged to their highest level since the last financial crisis. Well, now we are getting some very depressing numbers from the rail industry. As you will see below, U.S. rail traffic was down more than 11 percent from a year ago in April. That is an absolutely catastrophic number, and the U.S. rail industry is feeling an enormous amount of pain right now. This also tells us that “the real economy” is really slowing down, because less stuff is being shipped by rail all over the nation.

One of the economic commentators that I have really come to respect is Wolf Richter of WolfStreet.com. He has a really sharp eye for what is really going on in the economy and in the financial world, and I find myself quoting him more and more as time goes by. If you have not checked out his site yet, I very much encourage you to do so.

On Wednesday, he posted a very alarming article about what is happening to our rail industry. The kinds of numbers that we have been seeing recently are the kinds of numbers that we would expect if an economic depression was starting. The following is an excerpt from that article…

Total US rail traffic in April plunged 11.8% from a year ago, the Association of American Railroads reported today. Carloads of bulk commodities such as coal, oil, grains, and chemicals plummeted 16.1% to 944,339 units.

The coal industry is in a horrible condition and cannot compete with US natural gas at current prices. Coal-fired power plants are being retired. Demand for steam coal is plunging. Major US coal miners – even the largest one – are now bankrupt. So in April, carloads of coal plummeted 40% from the already beaten-down levels a year ago.

Because rail traffic is down so dramatically, many operators have large numbers of engines that are just sitting around collecting dust. In his article, Wolf Richter shared photographs from Google Earth that show some of the 292 Union Pacific engines that are sitting in the middle of the Arizona desert doing absolutely nothing. The following is one of those photographs…

As Wolf Richter pointed out, it costs a lot of money for these engines to just sit there doing nothing…

These engines are expensive pieces of equipment. When they just sit there, not pulling trains, they become “overcapacity,” and they get very expensive. Then there are engineers and other personnel who suddenly become unproductive. Some of them have already been laid off or are getting laid off.

All over the world, similar numbers are coming in. For example, the Baltic Dry Index fell 30 more points on Wednesday after falling 21 on Tuesday. Global trade is really, really slowing down during the early portion of 2016. What this means on a practical level is that a lot less stuff is being bought, sold and shipped around the planet.

To continue reading: Rail Traffic Depression: 292 Union Pacific Engines Are Sitting In The Arizona Desert Doing Nothing

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Freight Shipments Plummet as Inventory Glut Bites, by Wolf Richter

Posted on December 15, 2015 | Leave a comment

Within a month or two, maybe less, the Fed’s interest rate increase tomorrow is going to look like an act of monumental stupidity as it will be clear to all that the US and global economy are in a recession. It may be cited by future historians as an emblatic instance of central bank incompetence. From Wolf Richter at wolfstreet.com:

The goods-based economy swoons.

The transportation sector just keeps getting worse. Even after today’s uptick, the Dow Jones Transportation Average is back where it was in April 2014, and down 18% from its peak a year ago. Within this transportation sector is freight, a gauge of the goods-based economy, which is having a rough time.

In November, the number of freight shipments in North America plunged 5.1% from a year ago, according to the Cass Freight Index. It hit the worst level for any November since 2011.

The index is based on $28 billion in freight transactions processed by Cass on behalf of its client base of “hundreds of large shippers,” Cass explains. It covers shipments, regardless of the mode of transportation, including shipments by truck and rail. It does not cover bulk commodities. Shippers include companies in consumer packaged goods, food, automotive, chemical, OEM, heavy equipment, and retail.

This index of shipment volume has been lower year-over-year every month, with the exception of January and February, which makes for an increasingly awful looking year:

Reasons for these lousy shipment volumes are spread throughout the economy, including a litany of big retailers that have come forward with crummy results and disappointing projections.

Yesterday it was Dallas-based Neiman Marcus, which caters to luxury shoppers. It reported its first quarterly sales decline since 2009, down 1.8% from a year ago, with same-store sales down 5.6%. It booked a loss and laid off 500 people. As so many times, there’s a private-equity angle to it: Subject of an LBO in 2005, it’s now owned by Ares Capital and the Canadian Pension Plan Investment Board. They were hoping to make a bundle via an IPO. But now the IPO has been put on hold.

To continue reading: Frieght Shipments Plummet as Inventory Glut Bites

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