Overview
October looked like September for some key indicators for the industrial and consumer sectors. Industrial production declined, although some of the weakness was due to factors unrelated to the economy. Retail sales continued to rise with one major sector accounting for most of the improvement. Inventories relative to sales did not change much.
Rail traffic was weaker than it has been recently, but a key factor was a shutdown of Canadian ports. Meanwhile, the next couple of months might provide some insights into just how effective the Federal Motor Carrier Safety Administration’s drug and alcohol clearinghouse has been up to this point in removing drug-using drivers from America’s highways.
Industrial production and manufacturing
Industrial production (IP) declined for a second straight month in October and for some of the same reasons, although the decrease was not as large as it was in September. IP decreased 0.3% m/m, seasonally adjusted, and was down 0.3% y/y.
Two factors that hit September output were factors in October’s weakness as well but not to the same degree. One was the now-resolved Boeing strike that encompassed the full month of October after beginning around the middle of September. Another factor was weather – Hurricane Milton and the lingering effects of Hurricane Helene. The latter had been a factor in September along with Hurricane Francine.
Those factors were hardly the complete challenges, however, especially with the manufacturing of durable goods. The durable goods index fell 1.2%, and the decreases were widespread, the Federal Reserve said. The Boeing strike mostly accounted for a 5.8% drop in the output of aerospace and miscellaneous equipment.
Motor vehicles and parts production remained volatile, falling 3.1% m/m. Output was relatively stable in September, but it jumped 8.6% in August after an 8.7% drop in July. Automotive production was up 4.6% y/y, which is the strongest comparison since March, but that is due to the impact of the United Auto Workers strikes last October. Manufacturing output excluding automotive was still down but by a slightly smaller degree at -0.3% m/m.
The production of nondurable goods was not strong, but rather than falling it ticked up 0.1% m/m and was up 0.7% y/y. Gains in the IP indexes for chemicals, paper, and petroleum and coal products offset declines in those of textile mills, apparel and leather, printing and support, and plastics and rubber products.
Retail and food service sales
Retail and food service sales rose 0.4% m/m, seasonally adjusted, in October, but if you exclude motor vehicles and parts, sales ticked up just 0.1%. Commodities pricing was stable in October, so retail trade sales – a category that excludes food services – adjusted for inflation also was up 0.4% m/m. Nominal retail trade sales were up 2.6% y/y; real retail trade sales were up 3.7%.
After a couple of sluggish months, nominal sales for motor vehicle and parts dealers – the largest retail category by dollar value – rose 1.6% m/m and were up 3.4% y/y. The only retail sector to see a larger gain was electronics and appliance stores at 2.3%, but that category is less than 6% the size of automotive in value. The only other category to see more than 0.3% growth was food services and drinking places at an increase of 0.7%.
Retail sectors seeing notable declines included miscellaneous store retailers, down 1.6%; furniture and home furnishings stores, down 1.3%; and both health and personal care stores and sporting goods and related stores, down 1.1%.
Although nonstore retail sales ticked up just 0.3%, that category – second only to automotive in value – was the strongest of all retail sectors y/y at a 7.0% increase. The only sectors not to see a positive y/y comparison were gasoline stations (due to prices, of course), sporting goods, electronics and appliance stores, and department stores, the latter of which was flat y/y.
Trucking
Spot rates for dry van and refrigerated equipment moved by nearly the same degree during the week ended November 8 (week 45) but in opposite directions. Broker-posted spot rates for dry van equipment in the Truckstop system fell by the most in a comparable week since at least 2008 during the week while refrigerated spot rates saw their largest gain in a comparable week in five years. Flatbed spot rates fell by the most in 11 weeks but continued to move according to seasonal expectations.
The total broker-posted rate decreased more than 3 cents for the largest decline in 11 weeks. Rates were less than 1% above the same 2023 week but 6.5% below the five-year average.
Spot rates excluding a calculated fuel surcharge were more than 9% higher than the same 2023 week and were higher y/y for all equipment types.
For more on week 45 spot metrics for truck freight, visit https://freight.ftrintel.com/spotmarketinsights.
Rail/Intermodal
The strikes and lockouts at the Port of Montreal and at the British Columbia ports of Vancouver and Prince Rupert ended this week following weeks of either partial or total work stoppages. As with a rail strike earlier this year, the Canada Industrial Relations Board (CIRB) stepped in and forced binding arbitration between port operators and labor unions.
As noted below, work stoppages crashed Canadian intermodal volumes last week. Given the time needed to restore operations, Canadian railroads likely will see one or two more weeks of y/y rail traffic declines followed by a ramp-up of activity in the following weeks as the ports work through backlogs.
This dynamic would be similar to what happened with the eastern U.S. carriers, CSX and Norfolk Southern, following a brief East and Gulf Coast port strike in early October. During this time, we might also see stronger levels of traffic for the western U.S. carriers, as ships are diverted from Canadian ports to ports in the U.S. Pacific Northwest or California to avoid the congestion due to recovery.
