Archive for February, 2016

  • Housing Starts, Sales, and Inventory

    New home sales fall and inventories rise in January

    - by Tom Sanderson

    Single-family new home inventories increased by 5k to 238k in January (seasonally adjusted). Inventory levels slowly increased throughout 2014, peaking at 212k in December, but drifted down in the first 4 months of 2015 before rising again over the last 9 months. January’s new home inventories were 30k (14.4%) 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 (+6k) and homes under construction (+23k), not by completed homes (+1k).

    Seasonally adjusted new home inventories rose to 5.8 months of supply in January, up from 4.8 months a year ago and up from 5.1 months in December. Sales of single-family houses fell to 499k (annualized), down 9.2% from prior month and down 5.2% from prior year. 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. 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 well 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 January, but exceed prior year levels

    - by Tom Sanderson

    Housing starts totaled 1.099 million in January (seasonally adjusted annual rate – SAAR) down 3.8% from last month. Starts were 1.7% above the January 2015 rate but were below expectations. Single family starts totaled 731k (SAAR), down 3.9% from December and up 3.5% year-over-year. Total starts exceeded a 1.0 million unit annual pace for the 10th straight month.

    For the full year 2015, total starts were 1.111 million, up 10.8% over 2014. Single unit starts were up 10.3% in 2015, while 5+ unit starts were up 12.7%. 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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  • Auto Sales & Assemblies

    Auto assemblies increase in January

    - by Tom Sanderson

    Annualized U.S. assemblies of autos and light trucks increased 4.1% to 11.81 million units in January (seasonally adjusted), and were up 4.0% from January 2015. Seasonally adjusted assemblies were above an 11-million unit pace in each of the last eleven months. July 2015 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 only 0.2% in 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, and we have been above that level in each of the last 11 months

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  • Auto Sales & Assemblies

    Auto sales remain strong in early 2016

    - by Tom Sanderson

    Annualized seasonally adjusted U.S. sales (SAAR) of domestic and foreign autos and light trucks rose  to 17.5 million in January, coming in right at expectations, and remaining at or above a 17-million unit annual pace for nine consecutive months. Sales were  5.0% above prior year sales and were up 1.4% from prior month. Imported and domestic light truck sales performed much more strongly than auto sales, which actually declined year-over-year, 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. Year-over-year growth for our three month moving average was 4.5%.

    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 early decade 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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  • Carrier Rate Graphs

    TL rates post modest year-over-year gains

    - by Tom Sanderson

    Stephens Inc. released their Q4-2015 update on publicly traded TL carriers reporting that rates per loaded mile excluding fuel surcharge increased by 2.5% over the same period last year, and increased 3.5% from Q3 of 2015. Last quarter marked the twenty-third consecutive quarter of year-over-year TL rate increases.  TL rates exceeded the Q4 2014 peak for the first time. Contractual pricing is seeing modest increases, while spot market rates are down.

    Stephens expects Q1 2016 to drop from Q4 levels per normal seasonal patters (-1.9% on average), and I concur with that estimate. The dramatic decline in fuel prices has significantly lowered fuel surcharges, but that does not have any downward impact on linehaul rates. Quarterly data shows larger rate increases in the six quarters preceding Q4, with Q4 dropping to a level more similar to what was seen in 2012 and 2013.  The data does not necessarily represent the entire TL industry as the publicly traded carriers tend to be larger and more successful in general, so are also more likely to successfully raise rates.

    Average length of haul fell to 584 miles in Q4 from 644 in Q4 2014  Revenue per tractor per week was down from Q4 2014 but remains high by historical standards. Miles per tractor per week were down year-over-year and remain well below historical averages due to shorter lengths of haul and hours of service regulations.

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    Stephens TL Q4 15 qtr

    Stephens TL Q4 15 lohStephens TL Q4 15 rev utilStephens TL Q4 15 util


    Graphs reproduced with permission from Stephens Inc. For more information contact: Jack Waldo at jwaldo@stephens.com or Brad Delco at brad.delco@stephens.com.

  • Morgan Stanley Graphs

    Refrigerated capacity-demand balance at 2009 recessionary levels

    - by Tom Sanderson

    Morgan Stanley’s refrigerated freight index indicates that refrigerated capacity remains much more readily available than normal for this time of year. Refrigerated capacity began 2015 the same way it ended 2014, significantly tighter than normal. Throughout Q2 of last year, the market shifted with the result being that capacity was not nearly as constrained as normal. That was even more so the case in Q3 and Q4 as the index dropped to a level lower than in any recent year, including 2009. The index had leveled off and began 2016 at a similar level as in Q4 2015, but over the last few weeks the index dropped further.

    We do believe that in 2016 refrigerated rates will likely rise faster than the broader truckload market as little capacity is entering the industry and intermodal is not as strong for refrigerated freight. Demand for refrigerated transportation is less correlated to economic fluctuations than dry van or flatbed freight, so the future robustness of economic growth will not necessarily determine demand in this market. 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.

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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

  • Morgan Stanley Graphs

    Flatbed capacity is readily available

    - by Tom Sanderson

    Morgan Stanley’s flatbed freight index indicates that flatbed capacity in more readily available for this time of year than in any of the previous 7 years, but is slightly tighter than during the recession of 2009. Flatbed capacity modestly tightened through June of last year, but eased substantially after that. Since the index never rose very far in 2015, it did not have a long way to fall to reach and then drop below 2009 levels.The falloff has stabilized over the last few months.

    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 in 2014 as in 2010 and 2011. Low oil prices and a falloff in drilling activity meant that capacity never did tighten in 2015. 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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    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

  • Morgan Stanley Graphs

    Truckload capacity-demand balance favors shippers

    - by Tom Sanderson

    Morgan Stanley’s dry van truckload index indicates that van capacity is more readily available now than it has been in each of the last 7 Februaries, but is slightly tighter than during the recession year of 2009. Capacity is much more readily available than last year at this time. While there were seasonal regional shortages of capacity early in 2015, in general capacity became more readily available in the second half of the year. Three factors are driving excess capacity: weaker freight, hours-of-service rollback, and actual capacity additions. We do not expect capacity to tighten in 2016 unless the economy regains steam. 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

  • Retail & Same Store Sales

    Retail sales strong in January, led by auto sector

    - by Tom Sanderson

    Seasonally adjusted real retail and food service sales were up slightly at $188.95 billion in January. (Note that actual sales are deflated using CPI 1982 – 1984 = 100). January sales were 2.1% higher than the prior-year period. Nominal (unadjusted for inflation) seasonally-adjusted retail sales totaled $449.9 billion in December (second graph), up 0.1% from prior month, and up 3.4% from prior year results. The year-over-year percentage growth results were stronger than in any of the previous 11 months. The results were at consensus expectations. Excluding strong auto-related sales (+6.9%)  knocks nearly a full point off the year-over-year growth rate to 2.5%. For the trailing three-month period, nominal sales were up 2.5% year-over-year.   Nominal retail and food services sales excluding gasoline were up 4.5% year-over-year.    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, Sales, and Inventory

    Strong year-end new home sales drive down months of supply on hand

    - by Tom Sanderson

    Single-family new home inventories increased by 6k to 237k in December (seasonally adjusted). Inventory levels slowly increased throughout 2014, peaking at 212k in December, but drifted down in the first 4 months of 2015 before rising again over the last 8 months. December’s new home inventories were 25k (11.8%) above the prior-year level of 212k. 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 (+8k) and homes under construction (+20k), not by completed homes (down 3k).

    Seasonally adjusted new home inventories fell to 5.2 months of supply in December, up from 5.1 months a year ago but down from 5.6 months in November. Sales of single-family houses rose to 544k (annualized), up 10.8% from prior month and up 9.9% from prior year. 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. 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 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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