Consumer spending
Consumer spending adjusted for inflation increased in May, but the gain followed a significant downward revision of prior estimates for January through April.
Real consumer spending increased 0.3% m/m, seasonally adjusted, although prior-month revisions meant that the level of spending was basically the same as the initially published estimate for April. Real spending was up 2.4% y/y.
Real spending on goods rose 0.6% m/m while real spending on services ticked up 0.1%. Goods spending was up 1.7% y/y. Although growth in services spending trailed that for goods in May, it was up more strongly than goods y/y at 2.8%.
The largest contributor to the increase in goods spending was recreational goods and vehicles, led by computer software and accessories. The 5% m/m gain in that category was the largest in nearly three years. Within services, the largest contributors were transportation services, led by air transportation, and health care.
Sales of new homes
Sales of new single-family homes plunged 11.3% m/m, seasonally adjusted, in May for the largest drop since September 2022. Sales were down 16.5% y/y, which is the first negative y/y comparison since March of last year.
The big drop in May is a bit complicated, however, as it followed a sharp upward revision of prior months’ figures. The preliminary May estimate is just 2.4% below the initial figure that the Census Bureau had reported for April.
The large decrease in sales resulted in a sharp increase in the inventory of new homes on the market at the current sales rate. Inventories jumped to 9.3 months from the downwardly revised 8.1 months in April. The May inventory level is below that for most of the second half of 2022 but otherwise is the highest since the Great Recession.
UPS/FedEx
The nation’s two parcel giants took steps this week toward focusing on their core businesses. UPS announced that it is selling its Coyote Logistics unit to RXO for just over $1 billion. RXO said it will be the third largest provider of brokered transportation in North America when the deal closes, which is expected to be by yearend.
Also this week, FedEx Corp. announced as part of its fiscal fourth quarter earnings that it is assessing the role of its FedEx Freight LTL unit in its portfolio “and potential steps to further unlock sustainable shareholder value.” It is not yet clear whether FedEx would sell the LTL unit to another company or spin it off as RXO was spun off from XPO in 2022.
Trucking Rates
Broker-posted spot rates in the Truckstop system for dry van and refrigerated van equipment saw some strength during the week ended June 21 (week 25) as the market approached its traditional end-of-June peak.
Spot rates for dry van and refrigerated posted their largest week-over-week gains since International Roadcheck week in mid-May, but flatbed spot rates fell by the most in nearly a year after five straight increases. Rate moves were largely in line with seasonal expectations for all three equipment types.
Although seasonality was distorted during the pandemic, the current week (week 26) traditionally is the peak of spot rates for van equipment between the beginning of the year and the December holidays. The comparison of dry van and refrigerated rates this week versus the same 2023 week last year could be illuminating regarding market strength.
However, the day of the week on which the Independence Day holiday falls could result in some shifting of activity that could affect rates. Last year, July 4th was a Tuesday, but this year it is a Thursday due to Leap Year. Just that small difference could mean that more pre-holiday activity gets pushed into next week.
For more on week 25 spot metrics for truck freight, visit https://freight.ftrintel.com/spotmarketinsights.
Rail/Intermodal
Total rail traffic was up 1.9% y/y for the week ending on June 22 as strong intermodal volumes continue to offset weak carload traffic, according to data from the Association of American Railroads.
Carloads were down 1.6% y/y with only four of the 10 major commodity groups posting y/y gains. However, while only four commodity groups posted gains, coal continues to improve drastically on a w/w basis, alleviating much of the strain it has been placing on the total carload numbers. Coal shipments were up 4.2% w/w but still down 6.8% y/y.
Intermodal had another strong week, up 5.4% y/y. This number was, however, lower than the four-week average of 7.2%. Intermodal growth had been moderating through March and April but began to spike again in May and seems to now be moderating once again.
YTD, total rail traffic is up 2.0% with carloads down 3.6% and intermodal up 7.9%. Of the 10 commodity carload groups reported by the AAR, four show positive YTD y/y growth, unchanged from last week. These commodities include petroleum products (8.2%), chemicals (4.2%), motor vehicles & parts (1.9%), and grain (1.8%).
