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  • Auto Sales & Assemblies

    Seasonally adjusted auto assemblies drop in August

    - by Tom Sanderson

    U.S. assemblies of autos and light trucks fell to a seasonally adjusted level of 7.70 million in August from 8.38 million in July. July was somewhat unusual as the normal July auto assembly plant shut downs were not as pervasive as normal. In fact, non adjusted assemblies rose significantly between July and August. Our graph is a 3-month moving average of the seasonally adjusted annualized sales, and shows strong growth for 2010, but still very depressed levels compared to historical assembly volumes.

  • Freight Prices

    Capacity shortages featured in USA Today article

    - by Tom Sanderson

    It was somewhat surprising to see truck driver shortages featured on the front page of the business section of the USA Today on September 9. The full article can be accessed through this link USA Today. The article points out that despite a less than robust economic recovery and nearly 10% unemployment there are already shortages of trucking capacity that are driving up freight prices and causing missed deliveries. The article also points to a 4% increase in contract rates and as much as a 40% increase in spot rates in 2010. I agree that there has been some pressure on TL rates this year, but we are typically not seeing 4% increases in professionally managed transportation procurement events. On the other hand, we are definitely seeing requests for much more than 4% increases when transportation rates are negotiated the old-fashioned way; one carrier at a time. Spot rates have increased this year, and in some areas of the country there are double digit increases, but 40% seems a little extreme, unless it is a last minute situation. Overall I think the author jumps the gun in saying the sky is falling at this time.

    The article does correctly point out that when the economy recovers and new regulations come into effect the TL capacity shortage will be severe. The dark clouds on the horizon include CSA 2010, which many estimate will take 5-10% of the capacity off the road, hours of service reductions, electronic on-board recorder mandates, and speed limit reductions. Despite the tremendous safety record of the trucking industry, the federal government just can’t resist the urge to appear to do something useful without any regard to the economic cost of their actions.

  • Auto Sales & Assemblies

    No signs of life for auto sales

    - by Tom Sanderson

    Annualized seasonally adjusted U.S. sales of domestic and foreign autos and light trucks totaled 11.439 million in August; a small decline from July. Sales fell from 14.1 million in August of 2009, which was the height of cash for clunkers sales. Even using our more stable 3-month moving average, sales were off 3.1 percent from the prior year. This is the first decrease in year-over-year sales since November 2009. Sales have remained fairly stable between March and August of this year. Auto sales remain 32% below the average annual sales of 16.7 million from January of 2001 to December of 2007, before sales started to decline in 2008. The low point for sales was the first six months of 2009, when annualized sales averaged 9.621 million as potential buyers tightened their belts and waited for the July launch date of the federal cash for clunkers program. Upon expiration of the handout, sales dropped back below 10 million and have slowly regained some of the lost ground since then. It is clear from the data that the $3 billion cash for clunkers program did nothing but reward people for buying cars later or earlier than they had already planned. Our graph shows a 3-month moving average of seasonally adjusted annual rates to smooth out some of the month-to-month volatility.

  • Diesel Fuel Prices

    Diesel prices remain stable

    - by Tom Sanderson

    Weekly retail on-highway U.S. diesel prices eased slightly for the fourth straight week to $2.931 per gallon from $2.938 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, which is better illustrated in our second graph. 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, but with much lower volatility.

  • Diesel Fuel Prices

    Diesel prices drop 1.9 cents but remain close to $3 per gallon

    - by Tom Sanderson

    Weekly retail on-highway U.S. diesel prices eased for the third straight week to $2.938 per gallon from $2.957 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, which is better illustrated in our second graph. 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, but with much lower volatility.

  • ISM Manufacturing Index

    Manufacturing index increases in August

    - by Tom Sanderson

    The Institute of Supply Management reported that the Purchasing Managers’ Index (PMI) increased from 55.5 in July to 56.3 in August. This represents 13 consecutive months of growth and an increase after three straight months of small declines and an expected decline in August. 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

  • Morgan Stanley Graphs

    Morgan Stanley’s dry van truckload freight index continues to soften

    - by Tom Sanderson

    Morgan Stanley’s dry van truckload freight index has fallen off somewhat from the pace of Q2 2010 indicating more readily available capacity at this time compared to Q2 but certainly a much tighter capacity environment than 2009. 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. In Q2 it was starting to look like we may see a repeat of the TL capacity shortages of 2004 and 2005, but at this point the graph is tracking very closely to 2006 and 2008 which were strong through Q2 and then plunged toward the end of the year.

     

    Graph reproduced with permission from Morgan Stanley Research. For further information, please contact Bill Greene William.Greene@morganstanley.com or Adam Longson Adam.Longson@morganstanley.com

  • Housing Starts, Sales, and Inventory

    New home inventory months of supply spikes and sales fall off

    - by Tom Sanderson

    New home inventory increased to 9.1 months of supply in July from 8.0 months in June, driven by slower sales as the Federal Home Buyer Tax Credits expired. The absolute inventory of new homes continues to fall and is now at 209 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. The blue bars in the graphs represent recessions.

  • Stifel Nicolaus Carrier Results

    LTL carrier yields remain under pressure but financial performance improves

    - by Tom Sanderson

    Stifel Nicolaus (www.stifel.com) reported continued yield pressure but financial gains for publicly traded less than truckload (LTL) carriers in Q2. The Stifel industry sector Snapshot for the LTL sector showed a further compression of 1.2% in revenue per hundredweight (yield) including fuel surcharge. That makes 7 straight quarters of declining year-over-year yields for the LTL carriers as the battle to win YRC’s share and the weak economy continue to take a toll on the LTL segment. Operating ratios improved substantially from Q1 2010 and from Q2 of last year but have just now dropped below 100% for the first time since 2008. LTL carriers have a long way to go to achieve operating ratios in the low 90’s as they had achieved before the recession. Weight per shipment continues to climb as parcel carriers win smaller shipments and TL carriers only reluctantly accept multi-stop TL shipments. All else being equal, LTL yields vary inversely with weight per shipment, so part of the yield compression is not related to price reduction but to larger average shipment size. After six straight negative quarters, the composite LTL group showed EPS growth over a very weak 2009, and positive EPS for the quarter.

     

     

    Graph reproduced with permission from Stifel Nicolaus. For more information contact: JGLarkin@Stifel.com

  • Mexico Cross Border Trucking

    Mexico ratchets up trade war over cross-border trucking

    - by Tom Sanderson

    Once again, a critical issue in our industry is making headlines in the mainstream press. Last week Mexico expanded its retaliatory tariffs on U.S. products in protest of the on-going failure of the U.S. to honor our NAFTA commitments by allowing cross-border trucking with Mexico. There is an excellent editorial in the Wall Street Journal’s August 21 issue that can be read on-line by subscribers at WSJ Teamster Tariffs. The editorial is appropriately titled "The Teamster Tariff" in reference to the pressure that the union has successfully applied to thus far stop cross-border trucking. Mexico removed 16 items from the tariff list but added 26 new items, bringing the total list to 99 agricultural and industrial products affecting about $2.5 billion in trade with 43 states. Referring to truck safety concerns, Economy Secretary Gerardo Ruiz Mateos said "The argument was that the trucks did not comply with their safety rules, despite the fact that during the pilot program there were more than 46,000 crossings without any significant incidents." Mexico is targeting products that can easily be imported from other trading partners and targeting states where Senators and Representatives oppose cross-border trucking.

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  • Auto Sales & Assemblies

    Seasonally adjusted auto assemblies drop in August

    - by Tom Sanderson

    U.S. assemblies of autos and light trucks fell to a seasonally adjusted level of 7.70 million in August from 8.38 million in July. July was somewhat unusual as the normal July auto assembly plant shut downs were not as pervasive as normal. In fact, non adjusted assemblies rose significantly between July and August. Our graph is a 3-month moving average of the seasonally adjusted annualized sales, and shows strong growth for 2010, but still very depressed levels compared to historical assembly volumes.

  • Freight Prices

    Capacity shortages featured in USA Today article

    - by Tom Sanderson

    It was somewhat surprising to see truck driver shortages featured on the front page of the business section of the USA Today on September 9. The full article can be accessed through this link USA Today. The article points out that despite a less than robust economic recovery and nearly 10% unemployment there are already shortages of trucking capacity that are driving up freight prices and causing missed deliveries. The article also points to a 4% increase in contract rates and as much as a 40% increase in spot rates in 2010. I agree that there has been some pressure on TL rates this year, but we are typically not seeing 4% increases in professionally managed transportation procurement events. On the other hand, we are definitely seeing requests for much more than 4% increases when transportation rates are negotiated the old-fashioned way; one carrier at a time. Spot rates have increased this year, and in some areas of the country there are double digit increases, but 40% seems a little extreme, unless it is a last minute situation. Overall I think the author jumps the gun in saying the sky is falling at this time.

    The article does correctly point out that when the economy recovers and new regulations come into effect the TL capacity shortage will be severe. The dark clouds on the horizon include CSA 2010, which many estimate will take 5-10% of the capacity off the road, hours of service reductions, electronic on-board recorder mandates, and speed limit reductions. Despite the tremendous safety record of the trucking industry, the federal government just can’t resist the urge to appear to do something useful without any regard to the economic cost of their actions.

  • Auto Sales & Assemblies

    No signs of life for auto sales

    - by Tom Sanderson

    Annualized seasonally adjusted U.S. sales of domestic and foreign autos and light trucks totaled 11.439 million in August; a small decline from July. Sales fell from 14.1 million in August of 2009, which was the height of cash for clunkers sales. Even using our more stable 3-month moving average, sales were off 3.1 percent from the prior year. This is the first decrease in year-over-year sales since November 2009. Sales have remained fairly stable between March and August of this year. Auto sales remain 32% below the average annual sales of 16.7 million from January of 2001 to December of 2007, before sales started to decline in 2008. The low point for sales was the first six months of 2009, when annualized sales averaged 9.621 million as potential buyers tightened their belts and waited for the July launch date of the federal cash for clunkers program. Upon expiration of the handout, sales dropped back below 10 million and have slowly regained some of the lost ground since then. It is clear from the data that the $3 billion cash for clunkers program did nothing but reward people for buying cars later or earlier than they had already planned. Our graph shows a 3-month moving average of seasonally adjusted annual rates to smooth out some of the month-to-month volatility.

  • Diesel Fuel Prices

    Diesel prices remain stable

    - by Tom Sanderson

    Weekly retail on-highway U.S. diesel prices eased slightly for the fourth straight week to $2.931 per gallon from $2.938 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, which is better illustrated in our second graph. 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, but with much lower volatility.

  • Diesel Fuel Prices

    Diesel prices drop 1.9 cents but remain close to $3 per gallon

    - by Tom Sanderson

    Weekly retail on-highway U.S. diesel prices eased for the third straight week to $2.938 per gallon from $2.957 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, which is better illustrated in our second graph. 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, but with much lower volatility.

  • ISM Manufacturing Index

    Manufacturing index increases in August

    - by Tom Sanderson

    The Institute of Supply Management reported that the Purchasing Managers’ Index (PMI) increased from 55.5 in July to 56.3 in August. This represents 13 consecutive months of growth and an increase after three straight months of small declines and an expected decline in August. 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

  • Morgan Stanley Graphs

    Morgan Stanley’s dry van truckload freight index continues to soften

    - by Tom Sanderson

    Morgan Stanley’s dry van truckload freight index has fallen off somewhat from the pace of Q2 2010 indicating more readily available capacity at this time compared to Q2 but certainly a much tighter capacity environment than 2009. 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. In Q2 it was starting to look like we may see a repeat of the TL capacity shortages of 2004 and 2005, but at this point the graph is tracking very closely to 2006 and 2008 which were strong through Q2 and then plunged toward the end of the year.

     

    Graph reproduced with permission from Morgan Stanley Research. For further information, please contact Bill Greene William.Greene@morganstanley.com or Adam Longson Adam.Longson@morganstanley.com

  • Housing Starts, Sales, and Inventory

    New home inventory months of supply spikes and sales fall off

    - by Tom Sanderson

    New home inventory increased to 9.1 months of supply in July from 8.0 months in June, driven by slower sales as the Federal Home Buyer Tax Credits expired. The absolute inventory of new homes continues to fall and is now at 209 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. The blue bars in the graphs represent recessions.

  • Stifel Nicolaus Carrier Results

    LTL carrier yields remain under pressure but financial performance improves

    - by Tom Sanderson

    Stifel Nicolaus (www.stifel.com) reported continued yield pressure but financial gains for publicly traded less than truckload (LTL) carriers in Q2. The Stifel industry sector Snapshot for the LTL sector showed a further compression of 1.2% in revenue per hundredweight (yield) including fuel surcharge. That makes 7 straight quarters of declining year-over-year yields for the LTL carriers as the battle to win YRC’s share and the weak economy continue to take a toll on the LTL segment. Operating ratios improved substantially from Q1 2010 and from Q2 of last year but have just now dropped below 100% for the first time since 2008. LTL carriers have a long way to go to achieve operating ratios in the low 90’s as they had achieved before the recession. Weight per shipment continues to climb as parcel carriers win smaller shipments and TL carriers only reluctantly accept multi-stop TL shipments. All else being equal, LTL yields vary inversely with weight per shipment, so part of the yield compression is not related to price reduction but to larger average shipment size. After six straight negative quarters, the composite LTL group showed EPS growth over a very weak 2009, and positive EPS for the quarter.

     

     

    Graph reproduced with permission from Stifel Nicolaus. For more information contact: JGLarkin@Stifel.com

  • Mexico Cross Border Trucking

    Mexico ratchets up trade war over cross-border trucking

    - by Tom Sanderson

    Once again, a critical issue in our industry is making headlines in the mainstream press. Last week Mexico expanded its retaliatory tariffs on U.S. products in protest of the on-going failure of the U.S. to honor our NAFTA commitments by allowing cross-border trucking with Mexico. There is an excellent editorial in the Wall Street Journal’s August 21 issue that can be read on-line by subscribers at WSJ Teamster Tariffs. The editorial is appropriately titled "The Teamster Tariff" in reference to the pressure that the union has successfully applied to thus far stop cross-border trucking. Mexico removed 16 items from the tariff list but added 26 new items, bringing the total list to 99 agricultural and industrial products affecting about $2.5 billion in trade with 43 states. Referring to truck safety concerns, Economy Secretary Gerardo Ruiz Mateos said "The argument was that the trucks did not comply with their safety rules, despite the fact that during the pilot program there were more than 46,000 crossings without any significant incidents." Mexico is targeting products that can easily be imported from other trading partners and targeting states where Senators and Representatives oppose cross-border trucking.

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