Archive for June, 2015

  • Diesel Fuel Prices

    Diesel prices fall for 5th straight week

    - by Tom Sanderson

    Weekly retail on-highway U.S. diesel prices fell 1.6 cents to $2.843 per gallon on June 29th,  the fifth straight weekly decrease, totaling 7.1 cents. Diesel prices remain near a 5-year low point and are 27% below prior-year levels. As of June 9, the Energy Information Administration (EIA) was predicting a $2.88 per gallon average for 2015 and $3.04 for 2016.

    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 are now well below that range, and it appears prices will hold at the current level with some fluctuation in the near term. Diesel is now below the price level in each of the last five years for June.

    Diesel experienced a high but narrow pricing environment throughout 2013, fluctuating between the 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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  • Auto Sales & Assemblies

    Auto assemblies increase for third straight month

    - by Tom Sanderson

    Annualized U.S. assemblies of autos and light trucks increased 2.4% to 12.1 million units in May (seasonally adjusted), but were down 3.9% from May 2014. May assemblies were the highest since July 2014. Our graph is a three-month moving average of seasonally adjusted annualized assemblies. Using this moving average, year-over-year growth was 4.4% in May reflecting three consecutive months of growth but relatively strong comps from 2014. The 4.4% growth rate is the best since January. 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, just about equal to the average performance this year

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  • Auto Sales & Assemblies

    May auto and light truck sales at highest levels since July 2005

    - by Tom Sanderson

    Annualized seasonally adjusted U.S. sales (SAAR) of domestic and foreign autos and light trucks increased to 17.7 million in May, beating expectations (17.0 million) and posting the best monthly results since July 2005. Sales were  6.3% above May 2014 sales and were up 7.6% from prior month. Light truck sales performed more strongly than auto sales as low fuel prices sway buyers. The unit sales pace exceeded the early decade average (2001 – 2007) that has served as our primary barometer of the auto industry’s recovery. Auto sales remain below their all-time high (21.7 million), indicating there is still room for the industry to grow. Year-over-year growth for our three month moving average was 4.4%, reflecting weak April results.

    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 early decade average (16.7 million). This year should be the first since 2001 with more than 17 million units sold. 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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  • Retail & Same Store Sales

    Retail sales increased in May

    - by Tom Sanderson

    Seasonally adjusted real retail and food service sales increased to $187.7 billion in May, a 0.8% increase from April. (Note that actual sales are deflated using CPI 1982 – 1984 = 100). May sales were 2.6% higher than the prior-year period, a much larger year-over-year percentage growth than occurred in the previous three months. Nominal (unadjusted for inflation) retail sales totaled $444.9 billion in May (second graph), representing a 2.7% year-over-year improvement, and 1.2% increase from April results. The results were in line with the consensus expectation of a 1.3% increase for May. Nominal retail sales excluding gasoline were up 1.0% from April and were up 5.2% year-over-year. Year-to-date sales are up 1.9% from 2014. Consumers may finally be starting to spend the windfall received from lower gas prices.  We focus primarily on real retail sales because they are a better indicator of freight volumes than the inflated figures.

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  • Morgan Stanley Graphs

    Flatbed capacity more readily available than normal for Q2

    - by Tom Sanderson

    Morgan Stanley’s flatbed freight index indicates that flatbed capacity has modestly tightened but at a much slower pace than normal for Q2, Flatbed capacity is much more readily available than is normal for this time of year, and remains very similar to capacity-demand balance in 2013. Flatbed capacity tightened a little later than normal in 2014 but then remained tight longer than normal. Flatbed capacity-demand balance favored the carriers over the shippers more so in 2014 than in the previous two years, but capacity never became as tight last year as in 2010 and 2011. Low oil prices and a falloff in drilling activity may mean that capacity will not tighten much in 2015, although it still seems likely that flatbed capacity will tighten more than is the case today. 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.

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  • Morgan Stanley Graphs

    Van capacity more readily available than any Q2 since 2009

    - by Tom Sanderson

    Morgan Stanley’s dry van truckload index indicates that van capacity is much more readily available than last year at this time and also more readily available than at any time since 2009 for Q2. The graph shows that the capacity-demand balance line remains lower than the low point of 2014. While there are seasonal regional shortages of capacity, in general capacity has simply not tightened throughout Q2. This year had been tracking 2013, but that is no longer the case. It is still not clear whether the additional availability is driven by weaker freight, hours-of-service rollback, or actual capacity additions, but all three are likely contributors. We now think that we will see some tightening of van capacity as we move into peak fall shipping, but do not expect significant shortfalls until 2016. 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.

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    Graph reproduced with permission from Morgan Stanley. *2006-2014 average trend line excludes financial crisis years of 2008 and 2009. For more information contact: Alex Vecchio at Alexander.Vecchio@morganstanley.com or Bill Greene at William.Greene@morganstanley.com

  • Housing Starts, Sales, and Inventory

    Housing starts drop, but remain solid

    - by Tom Sanderson

    Housing starts totaled 1,036k in May (seasonally adjusted annual rate – SAAR) down 11% from last month which had been the first month above a 1.1 million unit pace since November 2013. Starts were 5.1% above the May 2014 rate of 986k. May starts were below expectations (1,090k). Single family starts totaled 680k (SAAR), 5.4% below April’s 719k but  up 6.8% year-over-year. Despite missing expectations, the overall picture was positive as permits were up and prior months were revised upwards.

    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%, so the rate of growth has definitely tapered off as 2015 YTD starts are up only 5.5%. 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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  • ISM Manufacturing Index

    Manufacturing growth strengthens in May

    - by Tom Sanderson

    The Institute of Supply Management (ISM) reported that the Purchasing Managers’ Index increased to 52.8 in May, following six straight months of declining or flat performance. PMI came in above expectations (51.8). March and April’s PMI were the lowest since May 2013, but May was the twenty-ninth consecutive month of expansion. The New Order Index rose to 55.8, up 2.3 points from April. The Production Index fell 1.5 points from 56.0 to 54.5. Of 18 manufacturing industries, 14 reported monthly expansion, down from 15 last month. After a slow start in January of 2014, PMI recovered, with a range of 54.3 to 58.1 for the balance of 2014. 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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