Overview
Economic indicators were mixed this week, but the biggest negative moves were unrelated to the health of the economy. Industrial production and manufacturing output fell, but a work stoppage at a single major manufacturer and the effects of two hurricanes were significant factors. Housing starts also declined, although not by much. Retail and food service sales, however, rose modestly.
The effects of one hurricane on spot rates in trucking subsided in the latest week’s data, but another hurricane, Milton, did not hit Florida until fairly late last week, so the market effects might not have shown up yet in the current week’s spot data.
Industrial production and manufacturing
Industrial production (IP) declined 0.3%, seasonally adjusted, in September, but inorganic factors such as a Boeing strike, which began last month, and effects from hurricanes Francine and Helene were factors. The strike accounted for a 0.3-point hit to IP, and the hurricanes together equaled that impact, the Federal Reserve said. IP was down 0.6% y/y.
Manufacturing output decreased 0.4% m/m and was down 0.5% y/y. A big factor was an 8.3% drop in the production of aerospace and miscellaneous transportation equipment due principally to the Boeing strike. However, declines were widespread within durable goods output, which was down 1%.
Retail sales
Retail and food services sales increased 0.4%, seasonally adjusted, in September and were up 1.7% y/y. Retail trade sales excluding food services increased 0.3% m/m, although they were up 0.5% when adjusted for a decline in prices for commodities during the month. Nominal retail trade sales were up 1.4% y/y while real retail trade sales were 2.9% higher than September 2023.
Individual retail categories saw a range of moves last month. Several saw gains of at least 1%, including miscellaneous store retailers (+4.0%); clothing stores (+1.5%); and health and personal care stores (+1.1%). Both food and beverage stores and food services and drinking places saw gains of 1% m/m.
Three retail sectors saw declines of more than 1%, including electronics and appliance stores (-3.3%); gasoline stations (-1.6%); and furniture and home furnishings stores (-1.4%).
Sales were flat m/m for the largest retail category by dollar value – motor vehicle and parts dealers. Sales for nonstore retail, which is the second-largest category, were up 0.4%.
Residential construction
Housing starts declined in September but only slightly. Starts decreased 0.5%, seasonally adjusted, and were down 0.7% y/y. The month’s weakness was solely due to homes in multi-family dwellings of five or more units. Multi-family starts fell 4.5% and were down 15.7% y/y. Single-family starts increased 2.7% and were up 5.5% y/y.
Permits authorized for future construction decreased 2.9% and were down 5.7% y/y. Single-family permits barely changed, ticking up 0.3%, and were 1.2% below the September 2023 level. Permits authorized for multi-family units fell 10.8% and were down 17.4% y/y.
The number of housing units under construction declined for the 10th straight month, decreasing 1.9% after a 2.3% drop in August that was the largest for a single month since 2010.
Given particular weakness in multi-family starts, that sector not surprisingly accounts for the recent drop in homes under construction, especially in August and September. Multi-family housing units under construction fell 3.5% in September after a 3.7% drop in August, both being very large single-month decreases historically. The number of single-family homes under construction ticked up marginally after five straight months of decline.
Trucking
After strong gains fueled by relief and recovery efforts and other disruptions due to Hurricane Helene, broker-posted spot rates in the Truckstop system cooled during the week ended October 11 (week 41). Dry van spot rates increased slightly while refrigerated rates eased a bit. Flatbed rates declined notably after a sharp gain during the previous week. As was the case with Helene, Hurricane Milton hit the U.S. late in the week, so the spot market might see a greater impact in the current week’s data.
The total broker-posted rate declined a little more than 1 cent after jumping more than 8 cents in the prior week. Rates were flat versus the same 2023 week but were more than 7% below the five-year average. Spot rates excluding a calculated fuel surcharge were about 9% higher than the same 2023 week and were positive y/y for all equipment types.
The current week (week 42) almost always sees lower rates week over week, especially for dry van and flatbed equipment, but effects from Hurricane Milton might produce a different dynamic this year.
For more on week 41 spot metrics for truck freight, visit https://freight.ftrintel.com/spotmarketinsights.
Rail/Intermodal
For the week ended October 12, total rail traffic was up 1.7% y/y, according to American Association of Railroads (AAR) data. Intermodal traffic was up 4.5% while carload volume was down 1.2%.
While still negative, carload traffic improved significantly from -4.5% y/y in the previous week. However, the drivers of the latest week’s uptick were groups that have not typically been among the growth leaders during 2024.
The commodity group with the greatest y/y gain was farm products excluding grain, up 10.4%. Metallic ores & metals – a commodities group that has struggled for most of the year – also saw strong growth at up 6.7% y/y.
Commodities that had the greatest negative effect on carload volume in the latest week were nonmetallic minerals, down 10.6%, and coal, down 3.9%.
Meanwhile, several commodities that generally have performed well – either recently or throughout the year – contributed to carload weakness in the latest week. Motor vehicles volume was down 8.0% y/y. Chemicals were down 1.3%, and petroleum products were down 1.1%. While the effects of the recent hurricanes factor into the stifled levels of carload traffic, chemicals and petroleum growth had already been moderating in recent weeks.
