Seasonally adjusted retail sales increased slightly in July to $166.7 billion from $166.5 billion in June. Year-over-year growth remains in the low single digits (4.15%) even though compared to a very poor 2009. From peak to current, retail sales are off 7.6%, a much smaller percentage decline than what has occurred in the housing and auto markets. July sales were 5.4% higher than the trough of the recent recession. March 2010 through July 2010 retail sales numbers are flat, stalling out what had been looking like a recovery. The blue bars in the graph represent recessions.

Weekly retail on-highway U.S. diesel prices eased slightly to $2.979 per gallon from $2.991 in the prior week. Prices have been in a fairly tight range since early March with a low of $2.899 and a high of $3.131. Diesel prices peaked at $4.764 per gallon in July of 2008 and were above $3 per gallon from September 24, 2007 to November 3, 2008. Prices in 2010 continue to fall between pricing levels of the prior two years.

 

 

The Institute of Supply Management PMI Index dropped from 56.2 in June to 55.5 in July. This represents 12 consecutive months of growth. A PMI over 50 indicates growth while a PMI under 50 indicates contraction in the manufacturing sector of the economy. The index reached a low of 32.5 in December but then recovered more quickly than other areas of the economy and remains one of the brighter spots in the economy today. The blue bars in the graph represent recessions.

Weekly retail on-highway diesel average prices jumped to $2.991 per gallon from $2.928 in the prior week. While there has been week-to-week volatility, diesel prices have been in a fairly steady climb from $2.017 per gallon in March 2009 to the current $3 level. Diesel prices peaked at $4.764 per gallon in July of 2008 and were above $3 per gallon from September 24, 2007 to November 3, 2008.

Diesel Aug 9 2010.jpg

Comparing weekly diesel prices for each of the last three years indicates that 2010 is squarely in the middle of 2008 and 2009. The unanswerable but critical question is: What will happen over the next 4-5 months to close out 2010?

Weekly diesel.jpg
 Source: U.S. Energy Information Administration (EIA), U.S. Department of Energy

By Sean McNally, Senior Reporter

This story appears in the Aug. 9 print edition of Transport Topics.

While the trucking industry waits for the Obama administration to complete its review of a new hours-of-service proposal, executives with some of the nation’s largest fleets warned that a cut in driving time would result in higher consumer costs, reduced efficiency and increased pollution.

If DOT or Congress "reduces the hours of service from 11 hours a day of driving, to say, nine . . . they are actually reducing capacity by the equivalent of 250,000 trucks," said Stephen Russell, chairman and chief executive officer of truckload carrier Celadon Group Inc. "That’s going to cause pricing to go through the roof."

Late last month, in compliance with a federal court settlement with Public Citizen and the Teamsters union, the Federal Motor Carrier Safety Administration sent its new HOS proposal to the White House for review. The rule is expected to be made public later this year.

The current rule allows for 11 hours of driving within a 14-hour period, followed by a 10-hour rest period. In June, Public Citizen put forth a suggestion that driving time be cut back to eight hours within a 12-hour period.

Jack Holmes, president of UPS Freight, the less-than-truckload division of UPS Inc., said he is concerned fleets would have to hire more drivers, and put more trucks on the road, if driving time is reduced

"If you have a proposal that results in more trucks on the road, it would certainly seem to be flawed," Holmes said.

Randy Mullett, director of government relations for Con-way Inc., said "the less hours when people are out on the road equals less productivity and less use of your assets."

A reduction in hours will be costly for trucking, he said, but it was not yet entirely clear how costly.

"What is difficult to figure is how much extra capacity does it require for additional equipment," Mullett said. "Does it change the ratio of tractors to trailers? I don’t think we have a good handle on that yet."

Celadon’s Russell said higher costs ultimately would get passed through to the consumer because "nobody’s going to eat it."

"It is going to drive pricing through the roof, and whatever every Tom, Dick and Harry buys, whether they’re buying American cheese or buying products from anywhere . . . it’s going to cost more," he said.

Holmes said when a new rule is published, fleets will have to review not only routes but entire transportation networks to see if changes need to be made to minimize the effects on customers.

Mullett agreed, saying that it is possible that "some things that are next-day [delivery] now may become two-day."

However, he was able to find a small upside for Con-way if there is a change.

"From the Menlo point of view . . . it might be a whole bunch of work for us, so every cloud might have a silver lining," Mullett said referring to Menlo Logistics Worldwide, the company’s logistics division.

David Abney, UPS’ chief operating officer, said the company believes no change in the rule is needed.

"The safety numbers since the change was made in ’04 back that up," Abney said. "If we felt that was an issue, it wouldn’t take the government saying that they needed to reduce the hours; we would the appropriate steps ourselves."

Despite the uncertainty, Mullett said it was too early for Con-way to spend time worrying too much about what might happen.

"We feel like that we’ve got the right people and systems that we can respond to a change," he said. "We’re hoping that it is not one that’s really costly or disruptive to the industry."

The Institute of Supply Management PMI Index dropped from 59.7 in May to 56.2 in June. This represents 11 consecutive months of growth. A PMI over 50 indicates growth while a PMI under 50 indicates contraction in the manufacturing sector of the economy. The index reached a low of 32.5 in December but then recovered more quickly than other areas of the economy and remains one of the brighter spots in the economy today. The blue bars in the graph represent recessions.

Transport Topics 8/5/2010 2:00:00 PM

Measure Backed by ATA, Shippers’ Group

A trio of senators introduced a bill that would allow states to increase the maximum weight for trucks operating on their interstates beyond the federal limit of 80,000 pounds.

Sens. Mike Crapo (R-Idaho), Susan Collins (R-Maine) and Herb Kohl (D-Wis.) said in introducing the Safe Efficient Transportation Act that states would be allowed to "opt in" and increase their weight limits to 97,000 pounds.

The legislation is identical to a bill introduced in the House last March by Reps. Michael Michaud (D-Maine) and Jean Schmidt (R-Ohio) and would require the new, heavier trucks to have six axles in order to diffuse the added weight.

"This bipartisan legislation strikes the right balance between productivity and safety," Kohl said in a statement.

The bill is backed by American Trucking Associations and the Coalition for Transportation Productivity, a shippers’ group, the two said in statements Thursday.

"ATA supports a number of reforms to federal truck size and weight regulations as part of our Sustainability Initiative," said ATA President Bill Graves.

"More efficient trucks, like those allowed under this legislation, will significantly reduce the trucking industry’s carbon output," he said in a statement.

June housing starts totaled 549 thousand down from 578 thousand in May. Housing starts remain 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. Low housing starts not only impact transportation demand for building products but also for appliances, furniture, and other related items.

New housing inventory is relatively high at 7.6 months in June, but the absolute inventory of new homes has fallen to just over 200 thousand, the lowest level seen since the late 1960’s. Any recovery in the rate of sales would quickly deplete the low absolute inventory level and lead to a significant increase in housing starts (and freight) but that does not appear likely in the near term.

Retail sales declined in June to a seasonally adjusted $166.0 billion from $166.7 billion in May. Year-over-year growth remains in the low single digits (3.65%) even though compared to a very poor 2009. From peak to current, retail sales are off 8%, a much smaller percentage decline than what has occurred in the housing and auto markets. June sales were 5% higher than the trough of the recent recession. While recovering, it would be hard to describe retail sales growth as robust.

Welcome to the Transplace Industry Blog. In this blog I share information covering three key areas plus topical miscellaneous items. First, I post the economic data that our Customer​s see in many of our quarterly business reviews. This is not meant to cover the entire economy, only some key items such as fuel prices as well as factors that drive freight demand such as retail sales and housing starts. Second, I identify some key regulatory and legislative issues that affect freight transportation. This section is more of an opinion and commentary on how each items affects the supply chain. I also provide links to other resources about the topic. Third, I’ll post information on Carrier and 3PL financial performance. Most of this data represents publicly traded companies as reported by highly respected financial analysts who cover the industry.
 
I hope you enjoy and learn from our blog. I welcome your comments and would prefer that you include your name, company, and title if you wish to opine. Feel free to use our graphs and charts in your own presentations. They are easy to copy, save, and paste.
 
I also want to publicly acknowledge and thank Shraddha Lakhera, a former graduate student at the University of North Texas, who was initially responsible for continuously updating the data, charts, and graphs that make our blog possible. Shraddha has graduated and joined Transplace International, our ocean and air forwarding business, but she continues to provide assistance when needed. Alec Abernathy, an undergraduate student at College of The Holy Cross, has assumed the primary duties for updating our charts and graphs and assisting with various research efforts.
 
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