C-Suite Synopsis for July 2021

Posted by The FTR Experts on 7/30/21 11:12 AM

This c-suite synopsis of the transportation markets is provided to all of our Premium clients along with weekly transportation updates.

Headlines

TRUCKING: A strengthening rate environment keeps trucking market conditions about the best ever.

RAILCAR: Several commodity groups came in lower than expected in June.

INTERMODAL: Congestion is spreading across the network.

SHIPPERS: Shipper's conditions mostly stalled at a highly negative environment.

Summary

The latest economic indicators generally were solid but not especially robust aside from the strong improvement in the labor market in June. Consumer indicators showed no gains, but it would be difficult to top the spending that occurred in March and April in the wake of the third round of stimulus. A good month for automotive output in May bolstered the industrial sector. Freight transportation volumes mostly were stable but at strong levels.

• The economy added a stronger-than-expected 850,000 payroll jobs, seasonally adjusted, in June. Employment remains 6.8 million jobs, or 4.4%, below February 2020.
• Consumer spending was flat in May, and retail sales were down 1.3%, but April consumption was the highest ever.
• Industrial production rose 0.8% and manufacturing rose 0.9% in May.
• Housing starts rose but home sales continued their slide in May as inventories tightened and prices rose.

Tags: trucking, intermodal, Rail, C-suite, transportation

Trucking Sector

• Trucking conditions remained quite robust in May. FTR’s Trucking Conditions Index (TCI) did not quite match April’s record level owing to a rise in diesel prices. The outlook is strong into 2022 at a minimum.

• The Federal Reserve’s annual revision of industrial production data results in a small decline in the 2021 growth outlook for truck loadings. However, a stronger forecast for the bulk/dump segment partially offsets declines elsewhere. The 2021 forecast is 6.9% growth in truck loadings. The 2022 outlook is a gain of 3.4%.

• Further reduced expectations for driver capacity growth and productivity gains are keeping FTR’s fore-cast of active truck utilization at 100% through Q3 and at nearly 99% through Q4. However, a gain in trucking jobs in June suggests risks of weaker utilization.

• For-hire trucking added 6,400 payroll jobs, seasonally adjusted, in June for the largest increase since Novem-ber. Seasonally adjusted employment remains 38,300 jobs, or 2.5%, below February 2020.

• Truckload rates are forecast to rise nearly 18% in 2021. Spot rates look to increase 27% while contract rate growth is forecast at more than 12%.

Rail/Intermodal Sector

• Congestion issues are seemingly worsening in the last few weeks with several different carriers embargoing inbound traffic at certain facilities and diverting other movements away from congested Chicago terminals. Peak season has not really even begun, and this congestion is on top of widespread port delays.

• One railroad said it is capping demurrage and detention charges for inaccessible containers as it works through congestion issues. The Federal Maritime Commission is investigating some ocean carriers over detention and demurrage practices, so this carrier’s move might be a bid to preempt a similar effort by rail regulators.

• The chemicals and grain sectors cooled off in June compared with previous growth expectations, shifting some carload growth expectations from 2021 into 2022.

• Automotive loadings are expected to pick up dramatically once supply chain constraints that have limited availability of semiconductors, rubber, and resins needed for manufacturing ease. Inventories are low in the sector, and sales demand is still running strong, giving manufacturers an incentive to produce at high rates for the next several quarters.