Overview
The economic theme for this week was “steady as she goes.” Consumer spending adjusted for inflation barely changed in August, and the same was true for durable goods orders and mortgage rates. The week also brought continued good news on consumer inflation, which could encourage the Federal Reserve to continue cutting interest rates.
Freight transportation looked far from steady, however, as a complete shutdown of container ports from Texas to Maine next week looked increasingly probable. Meanwhile, diesel prices ended a prolonged slide, and spot rates in trucking sank to their lowest level in more than four years.
Consumer spending and personal savings rates
Adjusted for inflation, U.S. consumers spent barely any more in August than they did in July. Real consumer spending ticked up 0.1% m/m, seasonally adjusted. Spending was up 2.9% y/y, and that comparison has been basically stable for four months.
The growth in spending, such as it was, came from services, which increased 0.2% and is up 3.0% y/y. Real spending on goods technically moved higher, but the gain was substantially less than 0.1%. Goods spending was up 2.7% y/y. Neither spending on durable goods nor spending on nondurables saw any significant change in August. Real spending on durable goods was up 3.8% y/y. Real spending on nondurable goods was up 2.2%.
The latest data from the Bureau of Economic Analysis included its annual update of the National Economic Accounts, revising income and consumer spending estimates back to January 2019. One notable consequence of the update is a stronger personal saving rate recently than what prior data indicated.
Saving as percentage of disposable income in August was 4.8%, down slightly from 4.9% in July. The prior data had shown a saving rate in July of 2.9%, which would have been almost the lowest since 2008. Instead, the current BEA estimate shows the current saving rate barely a point lower than it was on average during the period of 2015 through 2019. The updated data provides more comfort that consumers could continue spending at or above current levels for an extended period.
More good news in the latest data surrounds inflation. The personal consumption expenditures (PCE) price index increased less than 0.1%, which is cooler than it has been in most months, even before the pandemic. The PCE price index was up 2.2% y/y, down from 2.5% in July, putting inflation very close to the Fed’s target range.
Sales of new homes
After jumping more than 10% in July, sales of new single-family homes fell 4.7% m/m, seasonally adjusted, in August. However, owing to a weak result in August of last year, sales were up 9.8% y/y, which is the strongest comparison since October.
The supply of new homes at the current sales rate rose to 7.8 months, which is the third lowest since September 2023 but quite high by historic standards. The number of new single-family homes for sale rose 1.7% to a seasonally adjusted 467,000 – just barely below the highest level since 2008.
Trucking spot rates
Broker-posted spot rates for dry van equipment in the Truckstop system fell to their lowest level since June 2020 during the week ended September 20 (week 38), although they were lower than the rate during a week in May 2023 by only a tiny margin.
Refrigerated spot rates fell to their lowest level since April of this year. Flatbed spot rates eased marginally and are still at their lowest level since July 2020. Lower rates in the latest week followed seasonal expectations, especially for van equipment.
The total broker-posted rate decreased 2.6 cents to the lowest level since July 2020 after declining just over 2 cents in the prior week. Rates were 4% below the same below the same 2023 week and more than 10% below the five-year average.
The all-in broker-posted rate has been predominantly negative y/y since April 2022, but the lowest diesel prices in nearly three years shows a somewhat different picture for carriers’ overall finances, at least compared to a year ago. Excluding fuel costs (as estimated by a hypothetical fuel surcharge), broker-posted rates have been positive y/y for the past 10 weeks.
For more on week 38 spot metrics for truck freight, visit https://freight.ftrintel.com/spotmarketinsights.
East and Gulf port strikes
Starting with the potential East and Gulf Coast port strikes. We’re now just three days away from the expiration date of the USMX/ILA master contract. As the ILA has stated many times already, it is their full intention to go on strike immediately after the contract expires, on October 1st, if an agreement isn’t reached before then. This would essentially shut down all port operations on the U.S. East and Gulf Coast, for both container and roll-on/roll-off operations. This week, the USMX alliance, representing the carriers, employers, and port associations, announced that they have filed a complaint with the National Labor Relations Board (NLRB), claiming unfair labor practices on the part of the ILA. However, it’s unclear what, if any, impact this will have on the negotiation process, as the Biden administration has already stated that they are not considering invoking Taft-Hartley, a law that would force a cool-down period of 80-days where union workers would be required to work while negotiations take place.
In preparation for this ever more likely strike, STB chairman Robert Primus sent two letters this week, addressed to the CEOs of BNSF and Union Pacific, asking them to provide information on how they plan to handle East and Gulf Coast diversions to the West Coast, should a strike occur. Primus asked that the railroads provide details on three key aspects of their preparatory plans “(1) your plan to provide reliable service in the coming months; (2) your specific plan for allocation of resources to the West Coast ports; and (3) your level of transparency with the ports to share information about your operating plans.”
