Overview
Owing to a quirk of the calendar, this week brought an unusually large amount of economic data as figures on Gross Domestic Product, employment, manufacturing, and consumer spending were released in three days following data on job openings and retail inventories earlier in the week.
Solid growth in the economy – especially for the portion of the economy linked to freight – was tempered by the weakest job growth in nearly four years. However, the labor market was hit with several distortions, including a strike at Boeing and back-to-back hurricanes in the Southeast.
Gross Domestic Product
The strongest goods imports in two and a half years powered a big gain for the portion of the U.S. economy linked to freight transportation in the third quarter while tempering growth in the broader economy, at least by government calculations.
Gross Domestic Product (GDP) rose 2.8% quarter-over-quarter (q/q) on a seasonally adjusted annualized basis in the third quarter, nearly matching the 3.0% gain in Q2. The increase slightly exceeds FTR’s forecast of 2.5% annualized growth.
The largest factor in Q3’s increase was consumer spending as goods and services contributed almost equally to the gain. Government spending also was a notable positive. Fixed investment was barely stronger than neutral as a decline in residential investment and decelerating inventory investment nearly offset stronger nonresidential investment.
Exports also were a big positive – the strongest in two years – but overall international trade was a drag on GDP due to especially strong imports, which count as a negative in the GDP calculation. Imports posted their strongest gain since 2022Q1.
The strength in both imports and exports was heavily concentrated in goods as opposed to services, and the result was a big increase for the portion of the economy linked to freight transportation – what FTR calls the GDP Goods Transport Sector (GTS). GTS rose 6.9% annualized, which is the strongest performance since 2021Q4.
GTS has now recorded strong back-to-back quarterly gains, but imports were a big factor in both. The question now is the sustainability of that performance given that a pull-forward of imports to avoid the East/Gulf Coast container port strike is presumed to be a big factor in recent strength.
Employment situation
A strike at Boeing, a big drop in temporary jobs and likely – but undetermined – effects from two hurricanes resulted in the U.S. economy adding just 12,000 payroll jobs m/m, seasonally adjusted, according to preliminary figures from the Bureau of Labor Statistics. BLS also downwardly revised its earlier estimates for August and September by a net of 112,000 jobs.
October’s seasonally adjusted increase was the smallest since a drop in employment in December 2020. The revised August increase of 78,000 new jobs – down from 159,000 previously – is the second smallest increase during that period. Despite a gain in September that is 31,000 jobs smaller than it was initially, that month remains a notably high outlier for the second half of 2024 so far.
Sharply weaker job growth did not change the unemployment picture, however. The unemployment rate held at 4.1%. Labor participation edged down to 62.6%, which is the lowest level in four months.
Consumer spending
Consumer spending adjusted for inflation rose 0.4% m/m, seasonally adjusted, in September, according to preliminary estimates from the Bureau of Economic Analysis. Real spending was up 3.1% y/y, which is the strongest comparison since December.
Real spending on goods outpaced services spending, rising 0.7% m/m after a minor decrease m/m in August. Real spending on services ticked up 0.2% m/m. Spending still favored services on a y/y basis as services spending was up 3.2% while goods spending was up 2.8%.
Within goods, nondurables outpaced durables as real spending on nondurable goods rose 0.8% m/m while real spending on durable goods increased 0.4%. However, durable goods were stronger y/y at a 3.4% gain versus the 2.5% comparison for real spending on nondurable goods.
The largest contributor to the m/m increase in goods spending was other nondurable goods, led by prescription drugs, BEA said. Within services, the largest contributor was food services and accommodations, led by purchased meals and beverages.
Trucking Spot metrics
The disruption from hurricanes apparently has faded as broker-posted spot rates in the Truckstop system barely moved overall during the week ended October 25 (week 43). Even so, total rates posted their strongest y/y comparison since June 2022.
For more on week 43 spot metrics for truck freight, visit https://freight.ftrintel.com/spotmarketinsights.
Rail/Intermodal
For the week ended October 19, North American rail traffic was up 3.1% y/y with intermodal traffic up 6.0% and carloads up by 0.2%, according to data from the Association of American Railroads (AAR). While carload traffic’s y/y growth was slight, it represented a big improvement over the prior week’s 4.4% y/y deficit. The improvement comes from continued strength in grain and farm products (excl. grain), up 3.8% and 11.1%, respectively. Also growing this week were motor vehicles (up 7.6%) and forest products (up 3.2%), two commodity groups that have struggled in recent weeks.
The week also saw modest y/y growth in both chemicals (up 1.7%) and petroleum products (up 0.5%), although as in recent weeks, growth was weaker than experienced for moth of this year.
Carload declines came in commodity groups that have struggled throughout 2024. Coal was down 6.6% y/y. Metallic ores and metals were down 4.5%, and non-metallic minerals were down 1.0%. Even so, non-metallic minerals saw its best week in nearly two months.
Intermodal rail traffic also was stronger as the prior week’s y/y comparison had been +3.1%. This increase came primarily from the eastern carriers, CSX and Norfolk Southern. Both are now posting y/y gains in rail traffic after weak traffic levels before and immediately following the recent port strike.
Intermodal traffic for the western carriers remains strong, but continues to moderate, in line with expectations. Meanwhile, Canadian carriers’ traffic has remained flat or down, relative to 2023 levels.
Within carloads, four of the 10 AAR commodity groups show positive YTD y/y growth, unchanged from the previous week. These commodities include petroleum products, up 7.1%; grain, up 4.6%; chemicals, up 3.5%; and farm products excluding grain, up 2.7%. Intermodal traffic continues to outperform carloads and is currently up 7.7% YTD.
