Home | The Transplace Blog

Recent Posts

Categories

Archives

  • Auto Sales & Assemblies

    Auto sales continue to slide, while light truck sales continue to grow

    - by Tom Sanderson

    Auto sales continue to slide, while light truck sales continue to grow

    Annualized seasonally adjusted U.S. sales (SAAR) of domestic and foreign autos and light trucks fell to 16.41 million in June, coming in below the consensus forecast (16.6 million). Sales were 2.1% below prior year sales and were down 1.0% from prior month. Year-over-year sales for our three month moving average (graphed) were down 2.8%. Imported and domestic light truck sales performed much more strongly than car sales. Total year-to-date sales are down 2.2% over 2016, with light trucks up 4.6% and cars down 12.1%. Light trucks accounted for 63% of all unit sales year-to-date, up from 59% for the same period last year. After several years of rising sales, sales will decline slightly this year (red line on graph).

    Sales set an all time record in 2016 at 17.46 million following 2015’s then-record level of 17.40 million. To put those numbers in perspective though, they narrowly eclipsed 2000 (17.35 million) and 2001 (17.12 million). In 2017, sales are expected to be down slightly, but with inventories high, production is likely to be down more significantly from 2016 levels.

    Full-year sales total for 2014 were 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. Our graph shows a 3-month moving average of seasonally adjusted annual rates to smooth out some of the month-to-month volatility.

    image

  • Housing Starts, Sales, and Inventory

    New home inventories continue to rise, but sales remain strong also

    - by Tom Sanderson

    New home inventories continue to rise, but sales remain strong also

    According to the U.S. Census Bureau and the Department of Housing and Urban Development, single-family new home inventories increased to 272k in June (seasonally adjusted). Inventories are at the highest level since June 2009. June’s new home inventories were 29k (11.9%) above the prior-year level of 243k. New home inventories still remain somewhat low by historical standards, but are closing in on longer run average inventory levels (~340k).

    The growth in inventories in the last year (seasonally adjusted) has been driven by homes not yet started (+14k), more so than by homes under construction (+8K) or homes completed (+7k).

    New home inventories increased slowly during the first 9 months of 2016, from 237k in January to 242k in September, but then jumped to 256k by December, an increase of 19k from January. In 2015, inventories rose 27k; from 207k in January to 234k in December. Inventory levels increased 23k throughout 2014, peaking at 212k in December, and rose 38k in 2013, to 187k by December. The last year of flat inventories was 2012, when the absolute inventory of new homes remained within a consistent range of 142k – 150k.

    Seasonally adjusted new home inventories increased slightly to 5.4 months of supply in May, and were also up just slightly from from 5.2 months a year ago. Sales of new single-family houses increased to 610k (seasonally adjusted annual rate), up 0.8% from revised prior month sales and up 9.1% from prior year. Year-to-date 2017 sales are up 10.9%. Full-year 2016 sales of 561k were up 12.0% from 501k in 2015.

    Full year 2015 new home sales were up 14.6% over 2014. 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 with only one exception. In 2015, eight months were at 5.0 or greater months of supply, including each of the last 7 months of the year. In 2016, only one month (July) was less than 5.0 and so far this year every month has had at least 5 months of supply on the market. The average months of supply over the last 50 years is 6.1, so current new home inventory remain 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.

    image

    image

  • Morgan Stanley Graphs

    Van capacity is tight

    - by Tom Sanderson

    Van capacity is tight

    Moving through Q3, van capacity is significantly tighter than in 2016 and 2015, and is tighter than normal for this time of year. The index is almost identical to 2014, with the difference being that in 2014, we were relieved to see capacity tightness easing up from a very tough fist half of the year, and this year we are concerned that capacity could get much tighter if the economy expands and as ELDs are mandated.

    Capacity started to tighten up a little through July of 2016, but then the index flattened out through November. In December, capacity tightened and the index reached its highest level of 2016. That was a very different pattern than 2015, when capacity was at it tightest in January and became more readily available throughout the year.

    While the negative impact on capacity of ELDs will not be felt until late 2017, it is concerning that capacity is already this tight before the impact of ELDs is felt. If there is a surge in freight volumes later in Q3, capacity will tighten and we will see upward contract rate pressure. We have already seen spot rates increase in June and July, 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.

    MS van 7-26-17

    Graph reproduced with permission from Morgan Stanley. *2006-2016 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

    Refrigerated capacity has tightened, but only to normal seasonal levels

    - by Tom Sanderson

    Refrigerated capacity has tightened, but only to normal seasonal levels

    Morgan Stanley’s refrigerated freight index indicates that refrigerated capacity is significantly tighter than last year and 2015, and very close to the long-term trend line for late July. Aside from the severe excess capacity markets of 2015 and 2016, capacity-demand balance is about normal for this time of year.

    For most of 2016, refrigerated capacity was more readily available than in 2015, but in Q4 the lines crossed indicating a tighter capacity environment than in the prior year. Capacity continued to tighten through the end of January this year, but then eased off a little before gradually tightening throughout Q2 and into Q3.

    Refrigerated capacity began 2015 the same way it ended 2014, significantly tighter than normal. Throughout Q2 of 2015, 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.

    With tighter capacity this summer contract rates could begin to increase, as they already have in the spot market. Later in the year we could see more increases as smaller refrigerated carriers adopt ELDs and see equipment utilization drop by 4-5%.  Demand for refrigerated transportation is less correlated to economic fluctuations than dry van or flatbed freight, so the future robustness of GDP growth will not determine demand growth 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.

    MS reefer 7-26-17

    Graph reproduced with permission from Morgan Stanley. For more information contact: Alex Vecchio at Alexander.Vecchio@morganstanley.com

  • Morgan Stanley Graphs

    Flatbed capacity is tighter than normal for late July

    - by Tom Sanderson

    Flatbed capacity is tighter than normal for late July

    Morgan Stanley’s flatbed freight index indicates that flatbed capacity is tighter than normal for late July, and far tighter than was the case in the last two years in mid summer. The index is greater than all years except 2011 and 2014 over the last 8 years. In 2016, flatbed capacity was more readily available than was the case in 2015 until the last 6 weeks of the year, when the lines crossed. Flatbed capacity continued to tighten through the first half of 2017, but has leveled off over the last few weeks.

    2016 was a year of unusual stability and remarkable excess capacity in the flatbed market. With the ELD mandate coming in December (and given that the market is already tighter than normal), it is possible that we will see significant tightening of flatbed capacity through the end of the year.

    Flatbed capacity-demand balance favored the carriers over the shippers more so in 2014 than in the prior 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 or 2016. 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.

    MS flat 7-26-17

    Graph reproduced with permission from Morgan Stanley. *2006-2016 average trend line excludes financial crisis years of 2008 and 2009. For more information contact: Alex Vecchio at Alexander.Vecchio@morganstanley.com

  • Housing Starts, Sales, and Inventory

    June housing starts bounce back from weak May results

    - by Tom Sanderson

    June housing starts bounce back from weak May results

    Housing starts totaled 1.215 million in June (seasonally adjusted annual rate – SAAR) up 8.3% from prior month’s revised figures, and up 2.1% from June 2016 results, and were above expected levels. Single family starts totaled 849k (SAAR), up 6.3% from May and up 10.3% year-over-year. Starts of multi-unit (5+)structures were 359k (SAAR) up 15.4% from May but down 10.7% over prior year. Total starts exceeded a 1.0 million unit annual pace for the 27th straight month. Year-to-date starts are up 3.9%, with single family starts up 7.2% and 5+ unit starts down 4.2%.

    For the full year 2016, total starts were 1.174 million, up 5.6% over 2015. Single unit starts led the way with 9.4% growth, while multi-unit starts declined by 1.3%. In the prior couple of years single-unit starts grew more slowly than multi-unit starts. For the full year 2015, total starts were 1.112 million, up 10.8% over 2014. Single unit starts were up 10.3% in 2015, while 5+ unit starts were up 12.9%. 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%.

    Despite several years of strong growth, there remains a lot of ground to cover for the housing sector to fully recover from the recession. Housing starts are still well 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 more than 320 million. Some economists believe that slower population growth and household formation in the U.S. means 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.

    image

  • Diesel Fuel Prices

    Diesel prices rise for the fourth straight week

    - by Tom Sanderson

    Diesel prices rise for the fourth straight week

    Weekly retail on-highway U.S. diesel prices increased by 1.6 cents to $2.507 per gallon on July 24. This was the fourth consecutive weekly increase in fuel prices, following four straight weeks of declining prices. Diesel prices have fluctuated in a very narrow range between 2.465 and 2.597 per gallon since 12/19, never rising by more than 4.6 cents nor falling by more than 4.0 cents in any week during that period.

    In February 2016, diesel prices reached their lowest level ($1.980) since January 2005, dropping below the recessionary trough, before rebounding throughout the rest of the year, finally crossing the $2.50/gallon mark on 12/19. The last year that diesel did not hit $2.50 per gallon all year was 2004. We had been above that level all year up until June.

    Diesel prices are 12.8 cents per gallon higher than one year ago, but are 21.6 cents per gallon lower than two years ago. On July 11, the Energy Information Administration (EIA) decreased its pricing forecast by 7 cents to 2.66 per gallon for all of 2017, but still anticipates further increases this year, ending the year at $2.82.

    A view of weekly prices over the last 6+ years (second chart) indicates fairly stable prices between Q2 2011 and the start of the 2015 slide (min of $3.65 and max of $4.16). Diesel prices then stabilized between August 24 and November 16 of 2015, with a high of $2.561 and a low of $2.476 during those 13 weeks, but were in steady decline between then and February 2016 before beginning a slow but steady climb.Diesel remains below the July price level in each of the five years prior to 2016, but is greater than 2016 price levels.

    The recessionary low price point for diesel was $2.023 in March 2009. Diesel prices peaked at $4.771 per gallon in July 2008.

    image

    image

  • Retail & Same Store Sales

    Retail sales disappointing in June

    - by Tom Sanderson

    Retail sales disappointing in June

    The U.S. Bureau of the Census reported that seasonally adjusted real retail and food service sales were down slightly (-0.1%) at $194.2 billion in June. (Note that actual sales are deflated using CPI 1982 – 1984 = 100). June sales were 1.2% higher than the prior-year period.

    Nominal (unadjusted for inflation) seasonally-adjusted retail sales totaled $473.5 billion in June (second graph), also down slightly (-0.2%) from prior month, but up 2.8% from prior year results. This was the smallest year-over-year percentage increase since last August. Total nominal sales were up 3.3% for the full year 2016.

    The results were below consensus expectations. Nominal retail and food services sales excluding gasoline were up 3.2% year-over-year. Nonstore retailer sales (e-commerce and mail order) were up 9.2%. Gasoline station sales were up 0.3% year-over-year. Department stores sales fell by 3.9% year-over-year, while sporting goods, hobby and book store sales fell by 8.9%. We focus primarily on real retail sales because they are a better indicator of freight volumes than the inflated figures.

    image

    image

  • ISM Manufacturing Index

    Manufacturing index reaches highest point in nearly 3 years

    - by Tom Sanderson

    Manufacturing index reaches highest point in nearly 3 years

    The Institute of Supply Management (ISM) reported that the Purchasing Managers’ Index (PMI) increased  to 57.8 in June from 54.9 in May. This was the highest PMI since August 2014. So far every month of 2017 has had a higher index than any month of 2016. After contracting in August 2016, the manufacturing sector has expanded at a strong pace.  PMI came in above expectations (55.1). The New Order Index increase by 4 points to 63.5. The Production Index rose by 5.3 points to 62.4. Of 18 manufacturing industries, 15 reported monthly growth in June.

    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. In 2016, the index ranged from 48.2 (Jan) to 54.5 (Dec) but it was not a steady rise, with manufacturing contracting in February and August.

    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 most other areas of the economy.

    image

  • Housing Starts, Sales, and Inventory

    New home inventories inch up despite strong sales

    - by Tom Sanderson

    New home inventories inch up despite strong sales

    According to the U.S. Census Bureau and the Department of Housing and Urban Development, single-family new home inventories increased to 268k in May (seasonally adjusted). Inventories are at the highest level since July 2009. May’s new home inventories were 27k (11.2%) above the prior-year level of 241k. New home inventories still remain somewhat low by historical standards, but are closing in on longer run average inventory levels (~340k).

    The growth in inventories in the last year (seasonally adjusted) has been driven by homes not yet started (+16k), more so than by homes under construction (+8K) or homes completed (+3k).

    New home inventories increased slowly during the first 9 months of 2016, from 237k in January to 242k in September, but then jumped to 256k by December, an increase of 19k from January. In 2015, inventories rose 27k; from 207k in January to 234k in December. Inventory levels increased 23k throughout 2014, peaking at 212k in December, and rose 38k in 2013, to 187k by December. The last year of flat inventories was 2012, when the absolute inventory of new homes remained within a consistent range of 142k – 150k.

    Seasonally adjusted new home inventories held steady at 5.3 months of supply in May, but were up just slightly from from 5.2 months a year ago. Sales of new single-family houses increased to 610k (seasonally adjusted annual rate), up 2.9% from revised prior month sales and up 8.9% from prior year. Full-year 2016 sales of 561k were up 12.0% from 501k in 2015. Year-to-date 2017 sales are up 12.2%

    Full year 2015 new home sales were up 14.6% over 2014. 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 with only one exception. In 2015, eight months were at 5.0 or greater months of supply, including each of the last 7 months of the year. In 2016, only one month (July) was less than 5.0 and so far this year only March had fewer than 5 months of supply on the market. The average months of supply over the last 50 years is 6.1, so current new home inventory remain 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.

    image

    image

Load More

Recent Posts

Categories

Archives

  • Auto Sales & Assemblies

    Auto sales continue to slide, while light truck sales continue to grow

    - by Tom Sanderson

    Auto sales continue to slide, while light truck sales continue to grow

    Annualized seasonally adjusted U.S. sales (SAAR) of domestic and foreign autos and light trucks fell to 16.41 million in June, coming in below the consensus forecast (16.6 million). Sales were 2.1% below prior year sales and were down 1.0% from prior month. Year-over-year sales for our three month moving average (graphed) were down 2.8%. Imported and domestic light truck sales performed much more strongly than car sales. Total year-to-date sales are down 2.2% over 2016, with light trucks up 4.6% and cars down 12.1%. Light trucks accounted for 63% of all unit sales year-to-date, up from 59% for the same period last year. After several years of rising sales, sales will decline slightly this year (red line on graph).

    Sales set an all time record in 2016 at 17.46 million following 2015’s then-record level of 17.40 million. To put those numbers in perspective though, they narrowly eclipsed 2000 (17.35 million) and 2001 (17.12 million). In 2017, sales are expected to be down slightly, but with inventories high, production is likely to be down more significantly from 2016 levels.

    Full-year sales total for 2014 were 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. Our graph shows a 3-month moving average of seasonally adjusted annual rates to smooth out some of the month-to-month volatility.

    image

  • Housing Starts, Sales, and Inventory

    New home inventories continue to rise, but sales remain strong also

    - by Tom Sanderson

    New home inventories continue to rise, but sales remain strong also

    According to the U.S. Census Bureau and the Department of Housing and Urban Development, single-family new home inventories increased to 272k in June (seasonally adjusted). Inventories are at the highest level since June 2009. June’s new home inventories were 29k (11.9%) above the prior-year level of 243k. New home inventories still remain somewhat low by historical standards, but are closing in on longer run average inventory levels (~340k).

    The growth in inventories in the last year (seasonally adjusted) has been driven by homes not yet started (+14k), more so than by homes under construction (+8K) or homes completed (+7k).

    New home inventories increased slowly during the first 9 months of 2016, from 237k in January to 242k in September, but then jumped to 256k by December, an increase of 19k from January. In 2015, inventories rose 27k; from 207k in January to 234k in December. Inventory levels increased 23k throughout 2014, peaking at 212k in December, and rose 38k in 2013, to 187k by December. The last year of flat inventories was 2012, when the absolute inventory of new homes remained within a consistent range of 142k – 150k.

    Seasonally adjusted new home inventories increased slightly to 5.4 months of supply in May, and were also up just slightly from from 5.2 months a year ago. Sales of new single-family houses increased to 610k (seasonally adjusted annual rate), up 0.8% from revised prior month sales and up 9.1% from prior year. Year-to-date 2017 sales are up 10.9%. Full-year 2016 sales of 561k were up 12.0% from 501k in 2015.

    Full year 2015 new home sales were up 14.6% over 2014. 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 with only one exception. In 2015, eight months were at 5.0 or greater months of supply, including each of the last 7 months of the year. In 2016, only one month (July) was less than 5.0 and so far this year every month has had at least 5 months of supply on the market. The average months of supply over the last 50 years is 6.1, so current new home inventory remain 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.

    image

    image

  • Morgan Stanley Graphs

    Van capacity is tight

    - by Tom Sanderson

    Van capacity is tight

    Moving through Q3, van capacity is significantly tighter than in 2016 and 2015, and is tighter than normal for this time of year. The index is almost identical to 2014, with the difference being that in 2014, we were relieved to see capacity tightness easing up from a very tough fist half of the year, and this year we are concerned that capacity could get much tighter if the economy expands and as ELDs are mandated.

    Capacity started to tighten up a little through July of 2016, but then the index flattened out through November. In December, capacity tightened and the index reached its highest level of 2016. That was a very different pattern than 2015, when capacity was at it tightest in January and became more readily available throughout the year.

    While the negative impact on capacity of ELDs will not be felt until late 2017, it is concerning that capacity is already this tight before the impact of ELDs is felt. If there is a surge in freight volumes later in Q3, capacity will tighten and we will see upward contract rate pressure. We have already seen spot rates increase in June and July, 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.

    MS van 7-26-17

    Graph reproduced with permission from Morgan Stanley. *2006-2016 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

    Refrigerated capacity has tightened, but only to normal seasonal levels

    - by Tom Sanderson

    Refrigerated capacity has tightened, but only to normal seasonal levels

    Morgan Stanley’s refrigerated freight index indicates that refrigerated capacity is significantly tighter than last year and 2015, and very close to the long-term trend line for late July. Aside from the severe excess capacity markets of 2015 and 2016, capacity-demand balance is about normal for this time of year.

    For most of 2016, refrigerated capacity was more readily available than in 2015, but in Q4 the lines crossed indicating a tighter capacity environment than in the prior year. Capacity continued to tighten through the end of January this year, but then eased off a little before gradually tightening throughout Q2 and into Q3.

    Refrigerated capacity began 2015 the same way it ended 2014, significantly tighter than normal. Throughout Q2 of 2015, 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.

    With tighter capacity this summer contract rates could begin to increase, as they already have in the spot market. Later in the year we could see more increases as smaller refrigerated carriers adopt ELDs and see equipment utilization drop by 4-5%.  Demand for refrigerated transportation is less correlated to economic fluctuations than dry van or flatbed freight, so the future robustness of GDP growth will not determine demand growth 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.

    MS reefer 7-26-17

    Graph reproduced with permission from Morgan Stanley. For more information contact: Alex Vecchio at Alexander.Vecchio@morganstanley.com

  • Morgan Stanley Graphs

    Flatbed capacity is tighter than normal for late July

    - by Tom Sanderson

    Flatbed capacity is tighter than normal for late July

    Morgan Stanley’s flatbed freight index indicates that flatbed capacity is tighter than normal for late July, and far tighter than was the case in the last two years in mid summer. The index is greater than all years except 2011 and 2014 over the last 8 years. In 2016, flatbed capacity was more readily available than was the case in 2015 until the last 6 weeks of the year, when the lines crossed. Flatbed capacity continued to tighten through the first half of 2017, but has leveled off over the last few weeks.

    2016 was a year of unusual stability and remarkable excess capacity in the flatbed market. With the ELD mandate coming in December (and given that the market is already tighter than normal), it is possible that we will see significant tightening of flatbed capacity through the end of the year.

    Flatbed capacity-demand balance favored the carriers over the shippers more so in 2014 than in the prior 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 or 2016. 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.

    MS flat 7-26-17

    Graph reproduced with permission from Morgan Stanley. *2006-2016 average trend line excludes financial crisis years of 2008 and 2009. For more information contact: Alex Vecchio at Alexander.Vecchio@morganstanley.com

  • Housing Starts, Sales, and Inventory

    June housing starts bounce back from weak May results

    - by Tom Sanderson

    June housing starts bounce back from weak May results

    Housing starts totaled 1.215 million in June (seasonally adjusted annual rate – SAAR) up 8.3% from prior month’s revised figures, and up 2.1% from June 2016 results, and were above expected levels. Single family starts totaled 849k (SAAR), up 6.3% from May and up 10.3% year-over-year. Starts of multi-unit (5+)structures were 359k (SAAR) up 15.4% from May but down 10.7% over prior year. Total starts exceeded a 1.0 million unit annual pace for the 27th straight month. Year-to-date starts are up 3.9%, with single family starts up 7.2% and 5+ unit starts down 4.2%.

    For the full year 2016, total starts were 1.174 million, up 5.6% over 2015. Single unit starts led the way with 9.4% growth, while multi-unit starts declined by 1.3%. In the prior couple of years single-unit starts grew more slowly than multi-unit starts. For the full year 2015, total starts were 1.112 million, up 10.8% over 2014. Single unit starts were up 10.3% in 2015, while 5+ unit starts were up 12.9%. 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%.

    Despite several years of strong growth, there remains a lot of ground to cover for the housing sector to fully recover from the recession. Housing starts are still well 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 more than 320 million. Some economists believe that slower population growth and household formation in the U.S. means 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.

    image

  • Diesel Fuel Prices

    Diesel prices rise for the fourth straight week

    - by Tom Sanderson

    Diesel prices rise for the fourth straight week

    Weekly retail on-highway U.S. diesel prices increased by 1.6 cents to $2.507 per gallon on July 24. This was the fourth consecutive weekly increase in fuel prices, following four straight weeks of declining prices. Diesel prices have fluctuated in a very narrow range between 2.465 and 2.597 per gallon since 12/19, never rising by more than 4.6 cents nor falling by more than 4.0 cents in any week during that period.

    In February 2016, diesel prices reached their lowest level ($1.980) since January 2005, dropping below the recessionary trough, before rebounding throughout the rest of the year, finally crossing the $2.50/gallon mark on 12/19. The last year that diesel did not hit $2.50 per gallon all year was 2004. We had been above that level all year up until June.

    Diesel prices are 12.8 cents per gallon higher than one year ago, but are 21.6 cents per gallon lower than two years ago. On July 11, the Energy Information Administration (EIA) decreased its pricing forecast by 7 cents to 2.66 per gallon for all of 2017, but still anticipates further increases this year, ending the year at $2.82.

    A view of weekly prices over the last 6+ years (second chart) indicates fairly stable prices between Q2 2011 and the start of the 2015 slide (min of $3.65 and max of $4.16). Diesel prices then stabilized between August 24 and November 16 of 2015, with a high of $2.561 and a low of $2.476 during those 13 weeks, but were in steady decline between then and February 2016 before beginning a slow but steady climb.Diesel remains below the July price level in each of the five years prior to 2016, but is greater than 2016 price levels.

    The recessionary low price point for diesel was $2.023 in March 2009. Diesel prices peaked at $4.771 per gallon in July 2008.

    image

    image

  • Retail & Same Store Sales

    Retail sales disappointing in June

    - by Tom Sanderson

    Retail sales disappointing in June

    The U.S. Bureau of the Census reported that seasonally adjusted real retail and food service sales were down slightly (-0.1%) at $194.2 billion in June. (Note that actual sales are deflated using CPI 1982 – 1984 = 100). June sales were 1.2% higher than the prior-year period.

    Nominal (unadjusted for inflation) seasonally-adjusted retail sales totaled $473.5 billion in June (second graph), also down slightly (-0.2%) from prior month, but up 2.8% from prior year results. This was the smallest year-over-year percentage increase since last August. Total nominal sales were up 3.3% for the full year 2016.

    The results were below consensus expectations. Nominal retail and food services sales excluding gasoline were up 3.2% year-over-year. Nonstore retailer sales (e-commerce and mail order) were up 9.2%. Gasoline station sales were up 0.3% year-over-year. Department stores sales fell by 3.9% year-over-year, while sporting goods, hobby and book store sales fell by 8.9%. We focus primarily on real retail sales because they are a better indicator of freight volumes than the inflated figures.

    image

    image

  • ISM Manufacturing Index

    Manufacturing index reaches highest point in nearly 3 years

    - by Tom Sanderson

    Manufacturing index reaches highest point in nearly 3 years

    The Institute of Supply Management (ISM) reported that the Purchasing Managers’ Index (PMI) increased  to 57.8 in June from 54.9 in May. This was the highest PMI since August 2014. So far every month of 2017 has had a higher index than any month of 2016. After contracting in August 2016, the manufacturing sector has expanded at a strong pace.  PMI came in above expectations (55.1). The New Order Index increase by 4 points to 63.5. The Production Index rose by 5.3 points to 62.4. Of 18 manufacturing industries, 15 reported monthly growth in June.

    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. In 2016, the index ranged from 48.2 (Jan) to 54.5 (Dec) but it was not a steady rise, with manufacturing contracting in February and August.

    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 most other areas of the economy.

    image

  • Housing Starts, Sales, and Inventory

    New home inventories inch up despite strong sales

    - by Tom Sanderson

    New home inventories inch up despite strong sales

    According to the U.S. Census Bureau and the Department of Housing and Urban Development, single-family new home inventories increased to 268k in May (seasonally adjusted). Inventories are at the highest level since July 2009. May’s new home inventories were 27k (11.2%) above the prior-year level of 241k. New home inventories still remain somewhat low by historical standards, but are closing in on longer run average inventory levels (~340k).

    The growth in inventories in the last year (seasonally adjusted) has been driven by homes not yet started (+16k), more so than by homes under construction (+8K) or homes completed (+3k).

    New home inventories increased slowly during the first 9 months of 2016, from 237k in January to 242k in September, but then jumped to 256k by December, an increase of 19k from January. In 2015, inventories rose 27k; from 207k in January to 234k in December. Inventory levels increased 23k throughout 2014, peaking at 212k in December, and rose 38k in 2013, to 187k by December. The last year of flat inventories was 2012, when the absolute inventory of new homes remained within a consistent range of 142k – 150k.

    Seasonally adjusted new home inventories held steady at 5.3 months of supply in May, but were up just slightly from from 5.2 months a year ago. Sales of new single-family houses increased to 610k (seasonally adjusted annual rate), up 2.9% from revised prior month sales and up 8.9% from prior year. Full-year 2016 sales of 561k were up 12.0% from 501k in 2015. Year-to-date 2017 sales are up 12.2%

    Full year 2015 new home sales were up 14.6% over 2014. 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 with only one exception. In 2015, eight months were at 5.0 or greater months of supply, including each of the last 7 months of the year. In 2016, only one month (July) was less than 5.0 and so far this year only March had fewer than 5 months of supply on the market. The average months of supply over the last 50 years is 6.1, so current new home inventory remain 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.

    image

    image

Load More