Archive for November, 2015

  • Auto Sales & Assemblies

    Auto assemblies top 12-million unit annual pace again in October

    - by Tom Sanderson

    Annualized U.S. assemblies of autos and light trucks rose 0.6% to 12.07 million units in October (seasonally adjusted), and were up 9.5% from September 2014. Seasonally adjusted assemblies have been above a 12-million unit pace in 5 of the last 6 months. July posted one of the highest reported seasonally adjusted auto assembly totals in history. Our graph is a three-month moving average of seasonally adjusted annualized assemblies. Using this moving average, year-over-year growth was 6.4% in October, the best year-over-year gain since late 2014. 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 above that level in each of the last 8 months.

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  • Housing Starts, Sales, and Inventory

    New home inventories rise but months of supply down as sales surge

    - by Tom Sanderson

    Single-family new home inventories increased by 3k to 226k in October (seasonally adjusted). Inventory levels slowly increased throughout 2014, peaking at 212k in December, but drifted down in the first 4 months of this year before rising again over the last 6 months. October’s new home inventories were 18k (8.7%) above the prior-year level of 208k. New home inventories still remain very low by historical standards. 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. The growth in inventories in the last year (seasonally adjusted) has been driven by homes not yet started (+7k) and homes under construction (+13k), not by completed homes (down 2k). From year-end, homes not yet started are up 6k while homes under construction are up 12k and completed homes are down 4k.

    Seasonally adjusted new home inventories fell to 5.5 months of supply in October, up from 5.3 months a year ago but down from 6.0 months in September. Sales of single-family houses rose to 495k, up 10.7% from prior month and up 4.9% from prior year. YTD new home sales are up 15.7%. 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. In 2015, six of the first ten months have been at 5.0 or greater months of supply, including each of the last 5 months. The average months of supply over the last 50 years is 6.1, so current new home inventory is 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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  • Housing Starts, Sales, and Inventory

    Housing starts drop in October

    - by Tom Sanderson

    Housing starts totaled 1.060 million in October (seasonally adjusted annual rate – SAAR) down 11.0% from last month. Starts were 1.8% below the October 2014 rate and were below expectations, primarily due to weak multi-family starts. Single family starts totaled 722k (SAAR), down 2.4%% from September but up 2.4% year-over-year. Total starts exceeded a 1.0 million unit annual pace for the 7th straight month.

    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%.

    The rate of growth gained momentum from 2014, as 2015 YTD starts are up 10.2% at 941.5k. 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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  • Retail & Same Store Sales

    Retail sales up only 1.7% in October

    - by Tom Sanderson

    Seasonally adjusted real retail and food service sales fell to $187.9 billion in October, a 0.3% decrease from September. (Note that actual sales are deflated using CPI 1982 – 1984 = 100). October sales were 1.7% higher than the prior-year period. Nominal (unadjusted for inflation) retail sales totaled $447.3 billion in October (second graph), representing a 1.7% year-over-year improvement, and 0.1% increase from September results. The results were below consensus expectation of growth (+0.3%), and August and September results were revised downward.  Nominal retail and food services sales excluding gasoline were up 4.1% year-over-year. For the trailing three-month period, nominal sales were up 2.0% year-over-year. The results were weak, but excluding gasoline, 4.1% year-over-year growth is not bad.  We focus primarily on real retail sales because they are a better indicator of freight volumes than the inflated figures.

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  • Diesel Fuel Prices

    Diesel prices have stabilized during the last 3 months

    - by Tom Sanderson

    Weekly retail on-highway U.S. diesel prices fell 2 cents to $2.482 per gallon on November 16th,  the 21st decrease in the last 25 weeks, totaling 43.2 cents. Diesel prices have not quite retreated to the recent low point of $2.476 on 9/28 but are 32% below prior-year levels. Diesel prices have stabilized since August 24, with a high of $2.561 and a low of $2.476 during the last 13 weeks. As of November 10, the Energy Information Administration (EIA) held its pricing forecast to $2.72 per gallon average for 2015 but dropped its 2016 forecast to $2.70.

    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. Diesel is below the price level in each of the last six years for November.

    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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  • Highway Funding

    California meal-break and pay rules at odds federal rules for interstate commerce

    - by Tom Sanderson

    We received a letter from one of our key motor carriers, Interstate Distributor, alerting us and its other customers to two California laws that will have devastating impacts on freight transportation in the state, if not corrected in the current Highway bill.

    First, on top of federal hour of service regulations governing driver rest periods, California is mandating that drivers take breaks between 2 and 3.5 hours into a shift; before the 5th hour of the shift; between hours 6 and 8 of the shift; before the 10th hour of the shift; and between the 10th and 14th hour of the shift. If drivers stop on the highway it creates a safety hazard. If they pull off the road, approximately 30 minutes is lost for every break even though some of the mandated breaks are for only 10 minutes. The idea of forcing a professional driver to take three 10-minute breaks and two 30-minute breaks at government prescribed intervals during a shift is ludicrous. The penalties for failure to comply are steep.

    The second law, A.B. 1513 severely limits a trucking company’s ability to pay drivers by the mile, the long-time norm in the truckload sector of the industry. It takes effect January 1, 2016. This would be extremely harmful to the trucking industry, and ultimately to the shipping public and consumers.

    The Denham Amendment to the Highway Bill would restore a 1994 law that established Federal preemption over state law in meal/rest and piece rate regulations. Please contact your Congressional representatives to support the Denham Amendment.

    Here is one site that provides contact information.

  • Housing Starts, Sales, and Inventory

    New home inventories rise as sales fall

    - by Tom Sanderson

    Single-family new home inventories increased by 9k to 225k in September (seasonally adjusted). Inventory levels slowly increased throughout 2014, peaking at 212k in December, but drifted down in the first 4 months of this year before rising again over the last 6 months. September’s new home inventories were 16k (7.7%) above the prior-year level of 209k. New home inventories still remain very low by historical standards. 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. The growth in inventories in the last year (seasonally adjusted) has been driven by homes not yet started (+6k) and homes under construction (+12k), not by completed homes (down 2k). From year-end, homes not yet started are up 6k while homes under construction are up 12k and completed homes are down 5k.

    Seasonally adjusted new home inventories rose to 5.8 months of supply in September, up from 5.5 months a year ago and 4.9 months in August. The ratio has not been this high since July 2014. Sales of single-family houses fell to 468k, down 11.5% from prior month but up 2.0% from prior year. YTD new home sales are up 17.6%. 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. In 2015, four of the first nine months have been at 5.0 or greater months of supply. The average months of supply over the last 50 years is 6.1, so current new home inventory is 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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  • Auto Sales & Assemblies

    Auto sales exceed 18-million unit pace for second consecutive month

    - by Tom Sanderson

    Annualized seasonally adjusted U.S. sales (SAAR) of domestic and foreign autos and light trucks rose slightly to 18.1 million in October, beating expectations (17.7 million), and remaining at or above a 17-million unit annual pace for six consecutive months. Sales were  10.1% above prior year sales (one more selling day in 2015) and were up 0.3% from prior month. This was the second consecutive month above an 18-million unit pace. Back-to-back months at that pace have only happened two times in the past, the most recent being June-July 2005. Imported and domestic light truck sales performed much more strongly than auto sales as low fuel prices continue to sway buyers. The unit sales pace continues to exceed the early decade average (2001 – 2007) that has served as our primary barometer of the auto industry’s recovery. Annual U.S. auto and light truck sales only exceeded 17 million units in 2000 and 2001, peaking at 17.35 million in 2000. It is possible that 2015 will set a unit-sales record. Year-over-year growth for our three month moving average was 7.6%.

    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 will likely be the first since 2001 with more than 17 million units sold. Year-to-date sales are at 14.4 million units, up 5.9% from 2014. 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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  • ISM Manufacturing Index

    Very slow growth in manufacturing in October

    - by Tom Sanderson

    The Institute of Supply Management (ISM) reported that the Purchasing Managers’ Index decreased to 50.1 in October from 50.2 in September. PMI came in just above expectations (50.0) and indicated the slowest rate of growth since May 2013. October was the thirty-fourth consecutive month of expansion. The New Order Index rose to 52.9, up 2.8 points from September. The Production Index rose 1.1 points from 51.8 to 52.9. Of 18 manufacturing industries, 7 reported monthly expansion, the same as 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. We have yet to see a reading above 53.5 so far this year. 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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