Bank of America Corp.’s biweekly short-term truckload demand indicator increased 10% in the period ending Aug. 10 relative to the same stretch in 2022. This was the first year-over-year increase in 72 weeks, and the benchmark hit the highest level since June 2022, analyst Ken Hoexter wrote in a report. Accurate Transport, a New Jersey-based logistics company that was founded in 1997, had a record day this week for pallet volumes, pickups and revenue in its less-than-truckload business. This segment of the trucking economy, known as LTL, relies on a warehousing and distribution network to combine smaller shipments from various companies on one truck for short-haul deliveries. This was the specialty of Yellow Corp., the trucking company that went bankrupt earlier this month. “We’re expecting the third quarter and the fourth quarter to be really, really strong in the freight industry on the LTL side,” Brett Demmers, chief operating officer of Accurate Transport, said in an interview. “I think the bottom hit in March or maybe April, but it’s been an upward positive incline.”
Meanwhile, global average ocean freight rates for a 40-foot container have climbed for five consecutive weeks, according to data from maritime advisory and research firm Drewry. That’s the longest positive streak since January 2022, although shipping costs remain more than 80% below the September 2021 peak. The Port of Los Angeles moved more containers in June that it has in any month since last July, with volumes coming in just 5% below the 2022 record. Shipping giant Hapag-Lloyd AG is forecasting an almost 75% decline in its earnings before interest, taxes, depreciation and amortisation this year, but the good news is that it hasn’t had to tweak that estimate any lower since first publishing the outlook in March. Chief Executive Officer Rolf Habben Jansen told Bloomberg News he sees some “green shoots” on demand, adding that the underlying fundamentals of the global economy have been fairly resilient.
BloombergIt’s not just trucks and boats: Norfolk Southern Corp. has carried more than 60,000 originated carloads of intermodal volume in each of the three weeks through Aug. 4, the first time it’s broken past that threshold in 2023, even though this isn’t the busiest time of year for such traffic. Intermodal shipments involve goods that can be transferred from ships to either rails or trucks, a category of freight that’s dominated by consumer products. Air cargo volumes dropped 3.4% in June, but that was the smallest year-over-year decline since February 2022, according to the International Air Transport Association.
BloombergConsumers gorged on physical goods during the pandemic when there weren’t many other ways to spend disposable income. That changed as restaurants reopened, concerts returned and countries dropped travel restrictions. Suddenly, retailers that couldn’t keep shelves full had way too much inventory. The downshift in demand contributed to a glut of freight capacity. This helped break the post-pandemic supply-chain logjams, but the bullwhip effect wasn’t very helpful for shipping demand and prices. The pendulum may now be swinging back the other way — not toward the pandemic bustle but at least toward a point of stabilisation.
It’s certainly difficult to envision conditions in the freight market becoming much worse at this point. Cass Information Systems Inc.’s Freight Index showed an 8.9% drop in shipments in July relative to the period a year earlier. This gauge is now 13% below the December 2021 peak in seasonally adjusted terms, a slightly more pronounced decline than what occurred in two of the three freight down-cycles in the past dozen years. It’s hard to say exactly how long trucking companies, railroads and shippers might be bouncing along the bottom, but there’s reason to be optimistic that consumer demand for physical goods might pick up and retailers will start ordering fresh inventory. The Cass report released this week was titled “Lower for Longer?” but also said “dynamics are shifting as real incomes improve and the worst of the destock is in the rearview.” The pace of inventory contraction in July was the steepest in the seven-year history of the Logistics Managers’ Index.
US retail sales rose in July by more than forecast, with gains in nine of 13 categories, including sporting goods stores and clothing outlets, according to data released Tuesday from the Commerce Department. Home Depot Inc. separately reported better-than-expected second-quarter results as consumers continued to invest in home improvement, particularly smaller, do-it-yourself projects. “The US consumer is a little bit stronger than what a lot of economists thought,” Norfolk Southern CEO Alan Shaw said in an interview last month. “What we’re seeing as I talk to our channel partners and intermodal customers is that the inventory destocking that had marked the beginning of the year is probably at an end.”
Consumer products companies have been whittling down existing stockpiles and holding off on new orders for several quarters now, whereas the destocking trend is just starting to gain momentum in corners of the industrial world. As my Bloomberg Opinion colleague Conor Sen wrote, at a certain point consumers will have to prioritise buying goods over services again, and moderating inflation in this category may help them do so. The post-pandemic travel boom is already losing steam. Consumers only needed to buy so many sets of patio furniture during the pandemic, but enough time has passed that the grill might now be on the fritz and the redecorating choices made during the stay-at-home era may need rethinking. Freight companies will be only too happy to deliver the goods.
