Housing starts totaled 1.189 million in June (seasonally adjusted annual rate – SAAR) up 4.8% from last month’s figures which have been revised downward, but down 2.0% from June 2015 results, and were above expected levels. Single family starts totaled 778k (SAAR), up 4.4% from May (also revised downward) and up 13.4% year-over-year. Total starts exceeded a 1.0 million unit annual pace for the 15th straight month.YTD total starts are up 7.1% over 2015 while single family starts are up 13.2%.

In comparison to the last couple of years single-unit starts are growing faster than multi-unit starts. For the full year 2015, total starts were 1.112 million, up 10.8% over 2014. Single unit starts were up 10.3% in 2015, while 5+ unit starts were up 12.9%. For the full year 2014, there were 1.003 million total housing starts, up 8.8% from the 925 thousand starts during 2013. Single family starts were up 4.9% and multifamily starts were up 16.4%. Total 2013 housing starts were up a robust 18.5% from the 781k housing starts recorded in 2012 and in 2012 starts were up 28.2%.

There remains a lot of ground for the housing sector to recover from the recession. Housing starts are still 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. Since 1968, the U.S. population has grown from 200 million to over 300 million. Some economists believe that slower population growth and household formation in the U.S. mean that housing starts will not recover to 1.5 million units for a long time.

Total starts reached a low point of 478k (SAAR) in April of 2009, while single unit starts bottomed out at 353k in March of 2009. A low housing starts figure not only impacts transportation demand for building products but also for appliances, furniture, and other related items, so continued improvement in the housing sector should lead to rising freight volumes. The ATA estimates that each housing start generates 8 truckloads of freight.

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Transport Topics published an excellent article examining the impacts of Electronic Logging Devices (ELDs) on truck capacity and in particular regarding the impact on smaller carriers. They reached out to a number of large truck brokers, including Transplace, to find out what the primary users of small trucking companies are thinking. While most of us do not buy into the gloom and doom scenario regarding capacity reduction, we also agree that even a modest 3-5% reduction in effective capacity, through small carriers exiting the business and running fewer miles per truck, would shift capacity-demand balance back to levels experienced in 2014.

The mandate does not take effect until the end of 2017, so there is no immediate impact. In addition, there will be no impact among the larger carriers, nearly all of whom have already adopted ELDs.

In the meantime, some shippers and brokers are already demanding that carriers certify that they are ELD compliant. That is absurd. ELD providers self-certify to the FMCSA that their devices are compliant with the new regulations. As of today, there are six providers of ELDs that have self-certified. FMCSA does not and will not verify or challenge these self certifications. They could only be removed from the list if other organizations challenged whether the ELDs truly met the standards. Secondly, carriers self-certify that they are using a compliant device. Until roadside inspections start putting trucks out of service in 2018 for not utilizing ELDs, there is no way to be sure that carriers are utilizing ELDs.

Carriers are allowed but not required to utilize ELDs until December 18, 2017. Shippers and brokers that create their own more stringent rules than published by the FMCSA are increasing their own liability exposure in the event that their own rules are not followed 100% of the time. They are also kidding themselves, because there is only self certification, with no verification.

Let’s see how things play out in late 2017. There may be a short period of disruption in the transition, but I have a strong feeling that the most entrepreneurial players in our industry, the small truckers, will find a way to survive and occasionally thrive under the new rules.

Annualized seasonally adjusted U.S. sales (SAAR) of domestic and foreign autos and light trucks fell to 16.6 million in June, coming in well below the consensus forecast (17.4 million). Sales were 2.0% below prior year sales and were down 4.5% from prior month. Year-over-year sales for our three month moving average was up 0.1%. Imported and domestic light truck sales performed much more strongly than auto sales. Year-to-date sales are up 1.3% over 2015, with light trucks up 8.9% and cars down 7.9%.

Sales set an all time record in 2015 at 17.39 million, narrowly eclipsing 2000 (17.35 million) and 2001 (17.12 million). The full-year sales total for 2014 was 16.5 million up 6% from 15.6 million in 2013 and right in line with the prerecession 2001-2007 average (16.7 million). The recessionary low point for auto sales occurred during the first six months of 2009, when annualized sales averaged only 9.6 million units. Auto purchases represent a large portion of the typical household budget, and improving auto sales is directly correlated to rising confidence among American consumers. Our graph shows a 3-month moving average of seasonally adjusted annual rates to smooth out some of the month-to-month volatility.

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Seasonally adjusted real retail and food service sales increased to $190.5 billion in June. (Note that actual sales are deflated using CPI 1982 – 1984 = 100). June sales were 1.6% higher than the prior-year period.

Nominal (unadjusted for inflation) seasonally-adjusted retail sales totaled $457.0 billion in June (second graph), up 0.6% from prior month, and up 2.7% from prior year results.

The results were above consensus expectations (0.1% increase), but April and May were revised down. Nominal retail and food services sales excluding gasoline were up 3.9% year-over-year. Gasoline station sales were down 9.6% year-over-year. Total nominal sales are up 3.1% year-to-date. We focus primarily on real retail sales because they are a better indicator of freight volumes than the inflated figures.

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Housing starts totaled 1.164 million in May (seasonally adjusted annual rate – SAAR) down 0.3% from last month, but up 9.5% above May 2015 results, and were at expected levels. Single family starts totaled 764k (SAAR), up 0.3% from April and up 10.1% year-over-year. Total starts exceeded a 1.0 million unit annual pace for the 14th straight month.YTD total starts are up 10.2% over 2015 while single family starts are up 14.5%.

In comparison to the last couple of years single-unit starts are growing faster than multi-unit starts. For the full year 2015, total starts were 1.112 million, up 10.8% over 2014. Single unit starts were up 10.3% in 2015, while 5+ unit starts were up 12.9%. For the full year 2014, there were 1.003 million total housing starts, up 8.8% from the 925 thousand starts during 2013. Single family starts were up 4.9% and multifamily starts were up 16.4%. Total 2013 housing starts were up a robust 18.5% from the 781k housing starts recorded in 2012 and in 2012 starts were up 28.2%.

There remains a lot of ground for the housing sector to recover from the recession. Housing starts are still 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. Since 1968, the U.S. population has grown from 200 million to over 300 million. Some economists believe that slower population growth and household formation in the U.S. mean that housing starts will not recover to 1.5 million units for a long time.

Total starts reached a low point of 478k (SAAR) in April of 2009, while single unit starts bottomed out at 353k in March of 2009. A low housing starts figure not only impacts transportation demand for building products but also for appliances, furniture, and other related items, so continued improvement in the housing sector should lead to rising freight volumes. The ATA estimates that each housing start generates 8 truckloads of freight.

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Single-family new home inventories rose slightly to 244k in May (seasonally adjusted). Inventories had been rising since August 2015 but have leveled off over the last 4 months. May’s new home inventories were 34k (16.2%) above the prior-year level of 210k. New home inventories still remain low by historical standards.

The growth in inventories in the last year (seasonally adjusted) has been driven by homes under construction (+20k) more so than homes not yet started (+7k) or completed homes (+7k).

Inventory levels slowly increased throughout 2014, peaking at 212k in December. Inventories rose from 149k at the beginning of 2013 to 187k by December, following a year of remarkable stability in 2012 where the absolute inventory of new homes remained within a consistent range of 142k – 150k.

Seasonally adjusted new home inventories rose to 5.3 months of supply in May, up from 5.1 months a year ago and 4.9 months in April. Sales of single-family houses fell to 551k (seasonally adjusted annual rate), down 6.0% from revised prior month sales but up 8.7% from prior year. Year-to-date absolute sales are up 6.4% at 241k.

Full year 2015 new home sales were up 14.6% to 501k. For the full year 2014, new home sales only grew by 1.9% to 437k units. The months of supply figure remained below 5 months between February 2012 and June 2013, but was 5.0 or more from that point through the end of 2014 with only one exception. In 2015, eight months were at 5.0 or greater months of supply, including each of the last 7 months. The average months of supply over the last 50 years is 6.1, so current new home inventory remains slightly below “normal” levels. For the 9-year period of 1997 through 2005, the inventory level averaged 4.1 months with relatively little volatility, despite the dot-com boom and subsequent recession, and we are above that level today.  The vertical bars in the graphs represent recessions.

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The Institute of Supply Management (ISM) reported that the Purchasing Managers’ Index increased to 53.2 in June from 51.3 in May. March had broken a streak of 5 consecutive months of contraction in the manufacturing sector of the economy, and now we have 4 consecutive months of expansion. This is the highest Index since February 2015. PMI came in above expectations (51.5). The New Order Index rose 1.3  points to 57.0. The Production Index rose by 2.1 points to 54.7. Of 18 manufacturing industries, 13 reported monthly growth in June.

After a slow start in January of 2014, PMI recovered, with a range of 54.3 to 58.1 for the balance of 2014. We did not see a reading above 53.9 in 2015, and that high mark was reached in January. An index over 50 indicates growth while a PMI under 50 represents contraction in the manufacturing sector of the economy. The index reached a low of 32.5 in December 2008 but then recovered more quickly than other areas of the economy.

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Weekly retail on-highway U.S. diesel prices fell 0.9 cents to $2.414 per gallon on July 11,  the 2nd consecutive small weekly drop in prices. In February, diesel prices had reached their lowest level since January 2005, dropping below the recessionary trough. Diesel prices are still 44 cents or 14% below prior-year levels. Diesel prices had stabilized between August 24 and November 16 last year, with a high of $2.561 and a low of $2.476 during those 13 weeks, but were in steady decline between then and February. On July 12, the Energy Information Administration (EIA) increased its pricing forecast by 2 cents to a $2.36 per gallon average for 2016 and 2.71 per gallon for 2017.

A view of weekly prices over the last 6+ years (second chart) indicates fairly stable prices between Q2 2011 and the start of the recent slide (min of $3.65 and max of $4.16). We remain well below that range, but are coming closer to 2015 price levels. Diesel is well below the price level in each of the last six years for July.

Diesel experienced a high but narrow pricing environment throughout 2013, fluctuating between a low of $3.817 on July 1 and the high of $4.159 on February 25. In 2014, diesel prices remained within the 2013 range until early September, but then began a steep decline.  In 2012, diesel exceeded $4 per gallon for a total of 26 weeks but only reached that level for 8 weeks during 2013, and only 4 weeks in 2014. The recessionary low price point for diesel was $2.023 in March 2009. Diesel prices peaked at $4.771 per gallon in July 2008.

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Annualized seasonally adjusted U.S. sales (SAAR) of domestic and foreign autos and light trucks increased slightly to 17.4 million in May, coming in above the consensus forecast (17.2 million). Sales were 1.5% below prior year sales and were up 0.2% from prior month. Imported and domestic light truck sales performed much more strongly than auto sales. Year-over-year sales for our three month moving average was down 0.4%. Year-to-date sales are up 1.1% over 2015, with light trucks up 8.4% and cars down 7.7%.

Sales set an all time record in 2015 at 17.39 million, narrowly eclipsing 2000 (17.35 million) and 2001 (17.12 million). The full-year sales total for 2014 was 16.5 million up 6% from 15.6 million in 2013 and right in line with the prerecession 2001-2007 average (16.7 million). The recessionary low point for auto sales occurred during the first six months of 2009, when annualized sales averaged only 9.6 million units. Auto purchases represent a large portion of the typical household budget, and improving auto sales is directly correlated to rising confidence among American consumers. Our graph shows a 3-month moving average of seasonally adjusted annual rates to smooth out some of the month-to-month volatility.

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Annualized U.S. assemblies of autos and light trucks fell 7.1% to 11.06 million units in May (seasonally adjusted), and were off 8.8% from May 2015. Seasonally adjusted assemblies have been above an 11-million unit pace in each of the last 15 months, but May is the lowest total assemblies over that time frame. Our graph is a three-month moving average of seasonally adjusted annualized assemblies. Using this moving average, year-over-year assemblies are down 2.2%, the worst performance since November 2009.

The auto industry has come a long way since assemblies bottomed out at a 3.6 million-unit annual pace (seasonally adjusted) in January 2009. Average monthly seasonally adjusted assemblies were 11.4 million from January of 2001 through December of 2007, and we have been close to or above that level in each of the last 15 months

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