Archive for June, 2016

  • Auto Sales & Assemblies

    Auto sales remain above 17 million unit annual pace, led by strong light truck sales

    - by Tom Sanderson

    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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  • Auto Sales & Assemblies

    U.S. auto assembles slow down in May

    - by Tom Sanderson

    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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  • Carrier Rate Graphs

    LTL rates rise faster than TL rates in Q1

    - by Tom Sanderson

    Stephens Inc. reported that LTL yields (revenue per hundredweight) increased by 3.1% from Q1 2015 to Q1 2016, but decreased 0.9% from Q4 2015. The first quarter percentage increase was lower than any quarterly increase in 2015. For the full year 2015, LTL yields were up 5.9%. LTL yields dropped in Q4 of 2013 and Q1 of 2014, before resuming their post-recession climb, but that climb was interrupted in Q1 as rates dropped from Q4. Weight per shipment was down 2.2% year-over-year in Q1, likely due to plentiful TL capacity taking more of the heavier weight LTL shipments. Note that rate per hundredweight is higher at lower shipment weights so the weight drop is responsible for some of the yield increase.

    The LTL rate index remains just off its high point (series began in 1996) indicative of pricing discipline by the large LTL carriers. Stephens estimates that LTL rates will increase in the low-mid single digits in 2016. Tonnage was up 0.4% in Q1 ‘16 over Q1 ‘15 for the group of carriers reported on by Stephens. For the full year 2015, tonnage was down 0.8%, indicative of the softness in the freight market in 2015.

    From their previous Q4-2007 peak level, LTL rates dropped 11.2% to their trough in 2010 but have now surged 23.3% from Q2 ‘10 to the current near all-time high. Despite the improving trends, the challenges facing LTL carriers remain apparent as the current pricing levels remain only 9.6% over the previous peak in 2007 despite the realization of significant cost increases over that 9-year period. Some of the capacity issues that impact the TL segment, like CSA and Hours-of-Service rules, are not as relevant to the LTL segment. Industry concentration and consolidation does provide LTL carriers better pricing power than is the case for TL carriers.

    LTL Q1 16

    LTL Q1 qtr

    LTL Q1 16 tons

    LTL Q1 16 weight per ship

    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.

  • Carrier Rate Graphs

    TL rates under pressure in Q1

    - by Tom Sanderson

    Stephens Inc. released their Q1-2016 update on publicly traded TL carriers reporting that rates per loaded mile excluding fuel surcharge increased by 1.1% over the same period last year, and decreased 4.4% from Q4 of 2015. Last quarter marked the twenty-fourth consecutive quarter of year-over-year TL rate increases, but the smallest year-over-year increase since Q2 2010.  TL rates fell more than normal between Q4 and Q1. Contractual pricing is still seeing modest increases, while spot market rates are down.

    Stephens expects Q2 2016 to increase from Q1 levels but less than the historical average 1.4% increase, and I concur with that estimate. The dramatic decline in fuel prices year-over-year 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 ‘15, with Q4 dropping to a level more similar to what was seen in 2012 and 2013, and Q1 dropping even further.  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 588 miles in Q1 from 651 in Q1 2015  Revenue per tractor per week was down from Q1 2015 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 tougher hours of service regulations.

    TL Q1 16TL Q1 16 qtr

    TL Q1 16 qtr b

    TL Q1 16 LOH

    TL q1 rev per truck


    TL q1 16 miles per truck

  • Ocean Freight

    Spot market ocean rates have small rebound

    - by Tom Sanderson

    West coast ocean spot market rates increased $64 to $852 on June 3, while east coast rates increased $63 to $$1,685. East and west coast spot market oceans rates both rose for the second consecutive period but remain very low compared with historical levels. There was an extraordinary spike on 12/31/15, when west coast rates ($1,518) jumped 98% and east coast rates ($2,555) jumped 76%, but since then rates have trended down significantly. Both rates remain slightly higher than they were just before the year-end spike.

    The spread between east and west-coast ports declined from a peak of $2,937 on 2/27/15 to $682 on 12/25/15, then immediately jumped back up to $1,037, but has since declined to $833 on 6/3. There is not likely to be much more convergence as the premium drops below $1,000 at some times, but typically not for very long. Carrier’s clearly exercised their market power during the strike as shippers diverted freight to the east coast, but now spot rates have corrected to levels considerably lower than those preceding the strike.

    The SCFI reflects spot market rates for the Shanghai export container transportation market.

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  • Auto Sales & Assemblies

    Auto sales recover in April following weak March results

    - by Tom Sanderson

    Annualized seasonally adjusted U.S. sales (SAAR) of domestic and foreign autos and light trucks increased to 17.3 million in April, coming in at the consensus forecast. Sales were  3.7% above prior year sales and were up 5.2% from prior month. Imported and domestic light truck sales performed much more strongly than auto sales. Year-over-year growth for our three month moving average was 2.3%.

    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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  • Auto Sales & Assemblies

    U.S. auto assemblies remain strong

    - by Tom Sanderson

    Annualized U.S. assemblies of autos and light trucks increased 1.6% to 11.89 million units in April (seasonally adjusted), but were up only 0.4% from April 2015. Seasonally adjusted assemblies have been above an 11-million unit pace in each of the last 14 months. Our graph is a three-month moving average of seasonally adjusted annualized assemblies. Using this moving average, year-over-year growth was 4.1% in April.

    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 at or above that level in each of the last 14 months

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  • Retail & Same Store Sales

    Retail sales show stronger growth in April

    - by Tom Sanderson

    Seasonally adjusted real retail and food service sales increased to $189.8 billion in April. (Note that actual sales are deflated using CPI 1982 – 1984 = 100). April sales were 1.8% higher than the prior-year period.

    Nominal (unadjusted for inflation) seasonally-adjusted retail sales totaled $453.4 billion in April (second graph), up 1.3% from prior month, and up 3.0% from prior year results. The year-over-year percentage growth results were the second strongest in the last 12 months.

    The results were above consensus expectations. Nominal retail and food services sales excluding gasoline were up 4.1% 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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  • ISM Manufacturing Index

    Manufacturing grows for 3rd straight month after 5 straight months of contraction

    - by Tom Sanderson

    The Institute of Supply Management (ISM) reported that the Purchasing Managers’ Index increased to 51.3 in May from 50.8 in April. March had broken a streak of 5 consecutive months of contraction in the manufacturing sector of the economy, and now we have 3 consecutive months of expansion. PMI came in above expectations (50.6). The New Order Index fell 0.1  points to 55.7. The Production Index fell by 1.6 points to 52.6. Of 18 manufacturing industries, 12 reported monthly growth in May.

    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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  • Compliance, Safety, Accountability

    FMCSA admits CSA/SMS fix is 2 years away

    - by Tom Sanderson

    Yesterday, Transportation Secretary Anthony Foxx testified in Congress that it would take 2 years for FMCSA to  complete its review of CSA as mandated by the FAST Act. The law required that FMCSA remove SMS scores from the Web until the review was completed. After immediately removing SMS percentile scores and alerts from the Web, FMCSA exploited a loophole in the law by posting raw SMS scores without percentiles or alerts. FMCSA then doubled down by communicating its proposed new Safety Fitness Determination rule that is based, in part, on the flawed CSA/SMS program.

    So even though FMCSA admits it will take two years to remedy the flaws in the SMS system that have been pointed out by the General Accounting Office, Inspector General, and others, it still intends to utilize the system to put some unlucky carriers out of business with an “Unfit” safety rating.

    The commentary period is now closed, but numerous industry participants strongly objected to the proposed rule and Congress is considering legislative action that will prevent the rule from being implemented.

    I believe there is enough opposition to prevent this harmful rule from being implemented. Time will tell.

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