Overview
Economic data was light in a holiday-shortened week. Most notable was a decline in inflation-adjusted consumer spending on goods during April. Weaker spending on goods also was behind a small downward revision in the estimate of economic growth for the first quarter of this year.
Although a key driver of freight demand looked weaker, the cost side the ledger improved as diesel prices fell to their lowest level since January 2022.
Consumer spending
Adjusted for inflation, consumer spending in April dipped 0.1% m/m, seasonally adjusted, as real spending on services ticked up 0.1% while real spending on goods fell 0.4%.
Until recently, it had seemed that services spending had reset slightly below its pre-pandemic trend and that goods spending had reset slightly above trend. Data from recent months suggests that both goods and services could be returning to trend.
Within goods, real spending on durables held up fairly well, dipping just 0.1% m/m. One of the larger hits to durables was recreational goods and vehicles, led by information processing equipment. One of the offsets was real spending on new motor vehicles with gains in both automobiles and light trucks.
Gross Domestic Product
Economic growth during the first quarter was not particularly strong to begin with, but apparently it was not even as strong as we thought.
The Bureau of Economic Analysis this week released its second estimate of Gross Domestic Product, which grew 1.3% quarter-over-quarter (q/q) at a seasonally adjusted annual rate. The advance GDP estimate had been 1.6% growth.
The principal change was a downward revision to consumer spending, mostly due to goods. The advance estimate indicated a tiny negative contribution due to spending on goods. The second estimate still shows only a small negative due to goods spending, but the deterioration was greater than it was in services spending, which was by far the largest positive factor in Q1’s GDP growth. The revision in goods spending was mostly within durable goods, led by a downward revision in spending on motor vehicles and parts.
The second estimate is based on more complete data than the initial estimate. BEA will release a third estimate in June before unveiling an advance Q2 estimate in July.
Diesel and petroleum prices
The national average price of diesel dropped 3.1 cents to $3.758 a gallon during the week ended May 27. Diesel prices on average were at their lowest level since the week ended January 17, 2022.
As of the latest week, no region has an average diesel price above $5 a gallon as the average in California is now $4.985. The only other regions where diesel was above $4 a gallon in the latest week were New England and the Central Atlantic.
Diesel prices are still higher than they were at any point between late September 2014 and early January 2022. On the other hand, they are lower than they were during most of the time between early 2011 and September 2014.
Crude prices are suggesting stability in diesel prices. West Texas Intermediate has traded roughly between $78 a barrel and $80 a barrel throughout the month of May.
Spot metrics
Broker-posted spot rates in the Truckstop system increased modestly during the week ended May 24 (week 21) following the gains during the week that included the International Roadcheck event. Further rate increases for the total spot market during the week following Roadcheck are common and have occurred every year since the event moved to May in 2021.
The total broker-posted rate increased 1.7 cents after increasing about 3 cents during the previous week. Rates, which moved higher for all equipment types, were 5% below the same 2023 week and more than 7% below the five-year average.
Spot rates for van equipment are tracking more closely with comparable 2023 weeks than are rates for flatbed, which – while stable – have not shown any signs of their usual spring peak.
For more on week 21 spot metrics for truck freight, visit https://freight.ftrintel.com/spotmarketinsights.
Rail/Intermodal
Rail traffic results for week 21 were mixed with more commodity groups showing y/y declines than in recent weeks. According to the Association of American Railroads (AAR), total rail traffic was up 0.7% y/y for the week ended May 25.
Carloads were down 4.2% y/y last week after being down 1.4% in the prior week. The primary reason for the decline continues to be coal, but coal’s drag on the overall market is smaller now than it had been. In week 21, coal carloads were down 18.9%, but over the past four weeks, coal has seen weekly increases in rail traffic and is up from its trough of -27.6% y/y six weeks ago.
Beyond coal, carload saw broad declines across commodities with 13 of the 20 commodity groups seeing y/y declines. There were, however, a few bright spots. Petroleum and food products both saw strong y/y growth at up 13.7% and 8.1% y/y, respectively, with the remaining commodities coming in at less than 5% growth.
Intermodal had another strong week, marking the 20th week of y/y growth in 2024. In week 21, intermodal traffic was up 5.7%, exactly equal to its four-week average. Growth continues to be driven by container traffic, which was up 7.0% y/y for the week, and dragged down by trailer traffic, which was down 22.8% y/y.
YTD, total rail traffic is up 2.0%, with carloads down 3.6% and intermodal up 8.0%. Of the 10 commodity carload groups reported by the AAR, five show positive YTD y/y growth. These commodities include chemicals, petroleum products, motor vehicles & parts, grain, and “other.”
