Mar 242011

Auto assemblies show modest uptick

Posted By: Tom Sanderson
Date Posted:  Thursday, March 24, 2011  8:00 AM

U.S. assemblies of autos and light trucks exceeded 8 million for only the third month since the recession, posting an 8.4% gain from January. The broader picture is that assemblies have been relatively flat for the last 10 months ranging between 7.5 and 8.5 million units annualized. Our graph is a 3-month moving average of the seasonally adjusted annualized sales. Year over year percentage growth using the three-month moving average has flattened out as numbers are no longer being compared to the trough of the recession. Assemblies are still at very depressed levels compared to historical auto assembly volumes.


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Categories: Auto sales and assemblies
Mar 232011

Retail sales continue to climb

Posted By: Tom Sanderson
Date Posted:  Wednesday, March 23, 2011  3:00 PM

Seasonally adjusted real retail sales increased in February to $174.2 billion from $173.4 billion in January. (Note that actual sales are deflated using CPI 1982-84=100.) Year-over-year growth was 6.6%, marking the sixth straight month above 6% growth. From peak (Dec '06) to current, retail sales are only off 3.4%, a much smaller percentage decline than what has occurred in the housing and auto markets. February sales were 10.1% higher than the trough (Mar '09) of the recent recession. The vertical bars in the graph represent recessions.


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Categories: Retail sales and same store sales
Mar 232011

Housing starts plummet in February

Posted By: Tom Sanderson
Date Posted:  Wednesday, March 23, 2011  12:34 PM

Housing starts plunged to 479 thousand in February (seasonally adjusted annual rate) with single unit structures totaling only 375 thousand. Total starts nearly reached a new low for the last 50+ years almost matching the low mark of 477k from April of 2009. Single unit starts were also only slightly above all-time lows. The decline from January to February was a staggering 22.5% for total starts. Housing starts remain far below the average of just over 1.5 million per year over the last 40+ years, and even farther below the 2.2 million peak of the most recent housing boom. Total starts have been under 1 million (SAAR) for 32 straight months, averaging only 605k during this stretch. Since 1968, the U.S. population has grown from 200 million to over 300 million. Low housing starts not only impact transportation demand for building products but also for appliances, furniture, and other related items. The vertical bars represent recessions.

 


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Categories: Housing starts, sales, and inventory
Mar 232011

Diesel ends 15 straight weeks of increases

Posted By: Tom Sanderson
Date Posted:  Wednesday, March 23, 2011  7:19 AM

Weekly retail on-highway U.S. diesel prices eased by one-tenth of one cent to $3.907 per gallon This follows a remarkable 15 straight weeks of increasing prices that saw diesel rise from $3.162 on November 29 to $3.908 last week. Diesel prices have risen 93% since bottoming out at $2.023 on March 16, 2009. More recently, diesel is up 32% since late September, when the price was $2.951 per gallon. A view of weekly prices over the last 3 years is ominous, as 2011 is starting off with much higher prices than seen in 2009 or 2010 (second graph). With the economy showing glimmers of hope and the Fed intent on a weak dollar to support exports, a return to 2008 diesel fuel prices is looking much more likely. Diesel prices peaked at $4.764 per gallon in July of 2008 and were above $3 per gallon from September 24, 2007 to November 3, 2008 (over 13 months) and have been back over $3 since October 4, 2010 (only 5 months).


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Categories: Diesel fuel prices
Mar 162011

National Retail Federation blasts hours of service proposal

Posted By: Tom Sanderson
Date Posted:  Wednesday, March 16, 2011  2:11 PM

I have excerpted some of the key paragraphs from an excellent document submitted to FMCSA and published by the NRF opposing the proposed hours of service changes. The entire document is available on the NRF Web site.

NRF strongly supports the current HOS regulations and questions the need to make changes. Any changes to the current HOS regulations should be based on sound science and studies of safety and driver health. In addition, the FMCSA must consider the significant economic impact that changes to the current HOS will have across the industry, including the impact to retail operations at both the store and distribution center level. NRF appreciates the opportunity to submit comments in support of the current HOS regulations.

While many in industry were concerned about the impact of the HOS regulations when they first went into effect in January 2004, U.S. industry, including retailers, have adapted their operations to comply with these requirements. However, removing the current rules and reverting back to the old rules or some variation thereof, would result in significant cost increases for the industry as a whole and would adversely impact the U.S. economy. Our members estimate that the impact of the proposed change in hours of service rules could increase transportation costs by 3% to 20% depending on the specific retailer's network and operation. Many of our members also have concerns over the possibility for adverse unintended consequences as a result of the proposed changes that could lead to further cost increases. The reduction in transportation productivity and driver capacity owing to the rule change could substantially undermine supply chain performance in the retail sector.

If the 11-hour drive time limit were to be reduced to the previous 10-hour limit, we anticipate there will be a need for significantly more trucks and drivers on the road to fulfill the demands of what is currently being accomplished under the 11-hour on-duty time. We have similar concerns over the proposed change to the 34 hour restart rule that would include two consecutive nights (midnight – 6:00 am) of rest. These changes could reduce road safety resulting from the need for additional trucks on the road during peak commuter hours. Other impacts could include increased diesel emissions, additional congestion and more wear and tear on infrastructure.

In addition to the change to the maximum allowable drive time, other retailers are concerned about proposed changes to the 34 hour restart provision that includes two consecutive nights (midnight to 6 am) of rest. Many retailers with stores located in urban areas use nighttime hours to efficiently reach stores and restock shelves during less congested hours. The use of nighttime hours provides many retailers greater reliability over their supply chain by reducing congestion related delays. The deployment of more trucks during the night also separates truck and automobile interactions contributing to increased safety. The proposed change to the 34 hour restart provision to include two consecutive nights of rest reduces the ability to schedule deliveries at night placing more trucks on the road during normal commuting hours. This adversely impacts a retailer's supply chain performance, potentially increasing congestion related delays and increasing the likelihood of accidents as a result of greater truck and automobile interactions.

As the world's largest retail trade association, the National Retail Federation's global membership includes retailers of all sizes, formats and channels of distribution as well as chain restaurants and industry partners from the U.S. and more than 45 countries abroad. In the U.S., NRF represents the breadth and diversity of an industry with more than 1.6 million American companies that employ nearly 25 million workers and generated 2010 sales of $2.4 trillion.


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Categories: Hours of Service
Mar 162011

Diesel tops $3.90 per gallon

Posted By: Tom Sanderson
Date Posted:  Wednesday, March 16, 2011  11:34 AM

Weekly retail on-highway U.S. diesel prices continued to climb, rising to $3.908 per gallon, a 3.7 cent increase over the prior week to top $3.90 per gallon for the first time since September 29, 2008. This follows a remarkable 29.8 cent increase over the prior two weeks. Diesel prices have risen 93% since bottoming out at $2.023 on March 16, 2009. More recently, diesel is up 32% since late September, when the price was $2.951 per gallon. A view of weekly prices over the last 3 years is ominous, as 2011 is starting off with much higher prices than seen in 2009 or 2010 (second graph). With the economy showing glimmers of hope and the Fed intent on a weak dollar to support exports, a return to 2008 diesel fuel prices is looking much more likely. Diesel prices peaked at $4.764 per gallon in July of 2008 and were above $3 per gallon from September 24, 2007 to November 3, 2008 (over 13 months) and have been back over $3 since October 4, 2010 (only 5 months).


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Categories: Diesel fuel prices
Mar 152011

Morgan Stanley index shows flatbed capacity tightening at a rapid pace

Posted By: Tom Sanderson
Date Posted:  Tuesday, March 15, 2011  8:00 AM

Morgan Stanley's flatbed freight index is rising in a similar pattern to 2010 and 2004, and in fact shows tighter Q1 capacity than in any recent year. The index is not far off the pace of Q2 2010, indicating that capacity is nearly as tight as last spring. The flatbed market was particularly hard hit by the fall off in housing starts, but has gained some ground with the growth in U. S. manufacturing. The index measures incremental demand for flatbed truckload services compared to incremental supply. The higher the index the tighter is capacity relative to demand when compared to a prior period.

Graph reproduced with permission from Morgan Stanley. For more information contact: Adam Longson at Adam.Longson@morganstanley.com or Bill Green at William.Greene@morganstanley.com


Mar 142011

Refrigerated capacity remains tight

Posted By: Tom Sanderson
Date Posted:  Monday, March 14, 2011  3:30 PM

Morgan Stanley's refrigerated truckload freight index shows very tight capacity for this time of year. The index had been rising over the last few months, then dropped a little in late January and early February, but is now rising again. The index is not far below the level of Q2 2010 when capacity was extremely tight. Refrigerated capacity is very tight relative all of the reference years for Q1. The pricing environment in this segment clearly favors the carriers at this point. The index measures incremental demand for refrigerated truckload services compared to incremental supply. The higher the index the tighter is capacity relative to demand when compared to a prior period.

Graph reproduced with permission from Morgan Stanley. For more information contact: Adam Longson at Adam.Longson@morganstanley.com or Bill Green at William.Greene@morganstanley.com


Mar 142011

TL capacity continues to tighten

Posted By: Tom Sanderson
Date Posted:  Monday, March 14, 2011  1:00 PM

Morgan Stanley's dry van truckload freight index indicates tighter than normal capacity for this time of year. The Q1 index has now risen well above the trucking boom years of 2004 and 2005. Capacity tightness is roughly equal to the level of Q2 2010, when capacity was tight and prices were rising. The index measures incremental demand for dry-van truckload services compared to incremental supply. The higher the index the tighter is capacity relative to demand when compared to a prior period. While capacity is not overly tight at this time, TL capacity is tightening sooner than we had expected.

Graph reproduced with permission from Morgan Stanley. For more information contact: Adam Longson at Adam.Longson@morganstanley.com or Bill Green at William.Greene@morganstanley.com


Mar 142011

LTL yields are increasing but profits remain slim

Posted By: Tom Sanderson
Date Posted:  Monday, March 14, 2011  10:07 AM

Stifel Nicolaus (www.stifel.com) reported strong year-over-year yield growth but continued financial struggles for publicly traded less than truckload (LTL) carriers in Q4. The Stifel industry sector Snapshot for the LTL sector showed revenue per hundredweight (yield) including fuel surcharge increasing by more than 5%. That makes 3 straight quarters of rising year-over-year yields for the LTL carriers following 6 straight quarters of declining yields. Operating ratios deteriorated slightly in Q4 from Q2 and Q3 and remain just below 100%. LTL carriers have a long way to go to achieve operating ratios in the low 90's as they had achieved before the recession. Weight per shipment continues to climb as parcel carriers win smaller shipments and TL carriers only reluctantly accept multi-stop TL shipments. All else being equal, LTL yields vary inversely with weight per shipment, so part of the historical yield compression is not related to price reduction but to larger average shipment size. Composite net income, excluding YRCW, remains well below pre-recession levels.

Graph reproduced with permission from Stifel Nicolaus. For more information contact: JGLarkin@Stifel.com


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