Overview
As expected, some key economic indicators improved in February following weather-impacted activity in January. However, updated January data shows a bigger hit than previously indicated, and February’s gains did not offset those declines.
Pricing also was a concern as inflation remains sticky for both consumers and businesses, although volatile fuel prices were a significant factor in both. Within freight transportation, government pricing data for freight brokers continued to show strengthening, raising questions about underlying causes..
Retail and food service sales
The retail sector in February recovered some of its sales losses in January, although the Census Bureau lowered its preliminary figures for that month. Winter weather in January might have affected sales activity during that month, although the case is less persuasive than it is for industrial production.
In current dollars, retail and food service sales increased 0.6% after a 1.1% decrease in January. Adjusted for inflation, sales ticked up just 0.1% after falling 1.4% in January, according to data from the St. Louis Federal Reserve.
On a year-over-year basis, retail and food service sales were up 1.5% in current dollars. However, real sales were down 1.6% y/y.
The sharpest February sales gains were in sectors that suffered the biggest hits in January. Sales for building materials and garden supplies dealers rose 2.2% in current dollars after dropping 4.3% in January. Sales for motor vehicle and parts dealers – the largest sector in dollar volume – rebounded 1.6% after falling a revised 2.1% during January.
Supply chain inflation
Gasoline prices also were a major factor behind inflation within the supply chain as the Producer Price Index (PPI) for final demand rose 0.6%, seasonally adjusted, in February. The m/m increase was the largest in six months. The 12-month change of 1.6% was the largest since September.
Final demand goods accounted for two-thirds of the PPI increase, and the single largest factor in the goods increase was gasoline. Diesel and jet fuel also were contributors.
The PPI excluding food, energy, and trade services rose 0.4% m/m, down from the 0.6% gain in the previous month. The 12-month change was 2.8%, up from 2.6% in January.
The PPIs for freight transportation services mostly were higher in February, but preliminary data showed that the rail intermodal index fell 5% m/m, which is one of the largest decreases on record. The principal trucking sectors saw small m/m increases.
Arguably the most significant trend in freight transportation services pricing is the recent upturn in the PPI for freight transportation arrangement – i.e., brokerage. After plunging through August of last year, the PPI has rebounded more than 15% with gains in four of the last six months. Moreover, the m/m decreases in November and January were miniscule.
According to preliminary data, the PPI for freight transportation arrangement was down just 1.8% y/y in February after being down about 30% y/y as recently as August.
Although broker-posted spot rates paid to carriers are not yet signaling any inflection in the market, the rebound in the freight transportation arrangement PPI indicates that shippers are paying brokers more for their services. One interpretation is that shippers’ route guides are not as fluid as they had been, leading to greater demand for brokerage. However, it also is possible that broker margins simply had fallen to unsustainable levels given current spot rates, necessitating a firming in pricing even at the expense of volume.
Trucking
The total broker-posted spot rate in the Truckstop system barely moved during the week ended March 8 (week 10) after declining less than a penny during the previous week.
Dry van spot rates resumed their downward trend after a small uptick in the prior week while refrigerated spot rates increased for the first time since the weather-induced spike in mid-January. Flatbed rates rose by just enough to reverse the small decrease that had occurred the week before.
For more on week 10 spot metrics for truck freight, visit https://freight.ftrintel.com/spotmarketinsights.
Rail/Intermodal
Rail remains a tale of two sectors as overall carload traffic continues to run below prior-year levels while intermodal volume is running substantially above comparable 2023 levels.
Through the first 10 weeks of the year, total North American carload volume is down 4.2% y/y while total intermodal volume is up 7.4%. Intermodal’s strength as well as y/y improvement in chemicals and petroleum loadings were enough to produce a 1.4% y/y gain in total rail traffic through week 10.
The weakest y/y comparisons are in coal and nonmetallic minerals, which are down 12.1% and 9%, respectively through week 10. Grain also is down, though not as sharply at 6% y/y. Motor vehicles and parts are neither helping nor hurting volume comparisons as those carloads are flat y/y.
Rail traffic changed little week over week as total carloads were down 0.8% and intermodal volume was down 1.5% Economically sensitive freight ticked up 0.2% from the prior week.
