Overview
In an uncommon occurrence, residential construction in April outperformed industrial production and retail sales, both of which were basically flat m/m. However, the gain in housing starts followed the biggest seasonally adjusted drop since April 2020.
The automotive sector represented m/m drags in both manufacturing and retail sales, but motor vehicle and parts production was still quite strong in April at the fourth highest level ever recorded.
Consumer pricing continued to rise, although it did so at a slower rate than in March.
Residential construction
Housing starts rose 5.7% m/m, seasonally adjusted, in April, although the gain followed a revision of prior months’ data that shows an even larger drop in March than initially reported.
After decreases and increases in January and February that roughly offset one another, housing starts plunged 16.8% in March before the solid gain in April. Starts were down 0.6% y/y in April.
Starts of single-family homes dipped 0.4% m/m in April but were up 17.7% y/y. Conversely, starts of housing units in multi-family dwellings of five or more units surged 31.4% following a 38.1% drop in March, but they were down 32.9% y/y.
The Census Bureau revised its seasonally adjusted figures for permits authorized for future construction back to 2017, but the changes did not change the picture substantially. The revised March figure was marginally stronger than it had been, and permits fell 3.0% m/m, seasonally adjusted, in April.
The number of housing units under construction continued to decline as it has for five straight months. Homes under construction were down 3.9% from April 2023, which is the weakest y/y comparison since September 2011.
Consumer inflation
Consumer prices rose in April but not quite to the degree that they did in February or March. The Consumer Price Index for all items increased 0.3% m/m, seasonally adjusted, after gains of 0.4% in the two prior months. The indexes for shelter and gasoline together accounted for more than 70% of the monthly increase in the CPI for all items.
The 12-month change in the unadjusted CPI for all items was 3.4%, which was down slightly from 3.5% in March. Although it might not matter to consumers whether higher prices are due to goods or services, it appears that soaring inflation for commodities that was especially vexing during 2021 and 2022 may have finally ended.
The 12-month change for all commodities – including the volatile food and energy sectors – has basically settled since last fall. The services sector never saw price gains as dramatic as those for commodities, but nor has it seen rapid price stabilization. Pricing for services is still high on a 12-month change basis at up 5.3% and perhaps is still rising.
The CPI excluding the volatile food and energy sectors also increased 0.3% m/m, down from 0.4% in March. The 12-month change was 3.6%, which was down from 3.8% in March and the lowest y/y comparison since April 2021.
Producer-level inflation
While consumer inflation eased a bit in April, inflation at the producer level accelerated slightly. The Producer Price Index for final demand rose 0.5% m/m, seasonally adjusted, following a marginal decline in March. Final demand pricing was up 2.2% on a 12-month basis for the strongest y/y comparison in a year.
Pricing rose for both goods and services, but nearly three-quarters of the advance in PPI final demand was due to services.
Although not the largest factor in the PPI for services, the Bureau of Labor Statistics noted that trucking contributed to higher pricing. The PPI for truck transportation of freight increased 0.5% m/m after falling by the same percentage in March. The truck transportation PPI was down 1.0% y/y.
General freight truckload and LTL participated equally in the pricing gains as the PPIs for both rose 0.6% m/m in April. The truckload PPI was down 4.4% y/y for the least negative comparison since one of the same magnitude in January 2023.
The LTL PPI was up 8.2% y/y for the strongest comparison since November 2022. Solid y/y comparisons are essentially a lock until at least August, which will be the anniversary of Yellow Corporation’s exit from the market.
One sector that did not see pricing gains in April was long-distance specialized trucking. The PPI declined 0.5% m/m, although the -4.2% comparison with April 2023 is the least negative y/y comparison since September.
The PPI for freight transportation arrangement, or freight brokerage, rose 1.5% m/m and logged a notable achievement. The freight brokerage PPI was up 2.4% from April 2023 for the first positive y/y comparison since August 2022.
Pricing for commercial auto insurance premiums ticked up 0.1% m/m and was up 2.1% y/y, which is the same as it was in March.
Trucking
Broker-posted spot rates in the Truckstop system declined for each of the three principal equipment types during the week ended May 10 (week 19), although the changes were basically in line with seasonal expectations.
Dry van, refrigerated, and flatbed spot rates each declined by no more than they did during the same week last year. The current week included the three-day International Roadcheck roadside inspection event, which almost always results in sharp increases in spot rates as many drivers choose not to operate so as to avoid the hassle and scrutiny.
The total broker-posted rate declined just over 1 cent after holding basically flat during the prior week. Rates were nearly 4% below the same 2023 week and almost 6% below the five-year average for the week. Rates presumably rose significantly this week. Roadcheck week in both 2022 and 2023 saw rates rise about 7 cents week over week, and the gains were especially strong for van equipment.
For more on week 19 spot metrics for truck freight, visit https://freight.ftrintel.com/spotmarketinsights.
Rail/Intermodal
The Canadian Industrial Relations Board (CIRB) has decided to investigate the potential implications that a labor strike at both Canadian Class Is would have on the supply chain and to determine what “essential” commodities must continue to move in the event of a strike.
The strike by Teamsters Canada was originally set to begin as early as May 22 assuming no resolution of differences between labor and management. The CIRB assessment will push the earliest date that a strike can legally begin until June or possibly July.
