Weekly Transportation Update: Retail inventories aside from automotive are extraordinarily lean.

Overview

Key indicators continue to show an economy that is holding steady but not growing much. New orders for durable manufactured goods were flat excluding the distortions created by aircraft and autos. Consumer spending was solid but not robust.

One interesting development was a further decline in retail inventories relative to sales to a level never seen before the pandemic. Perhaps retailers have been betting that consumer spending on goods would fall and might now need to shift into inventory restocking mode.

Durable goods orders

Total new orders for durable manufactured goods fell 5.4% m/m, seasonally adjusted, in October, but transportation equipment was a major drag. New orders for civilian aircraft plunged 49.6%, and orders for motor vehicles and parts fell 3.8% due to the work stoppages. Excluding transportation equipment, new orders for durable goods were flat m/m and 1.3% above October 2022.

One key subset of durable goods orders is orders for core capital goods, or nondefense capital goods excluding aircraft. New orders for core capital goods were nearly flat m/m, easing just 0.1%, and were 0.6% above October 2022.

One factor that distorts analysis of this data is the fact that it is not adjusted for inflation. To provide a better understanding of the core capital goods data, FTR adjusts it by the Producer Price Index for private capital equipment.

Real new orders for core capital goods declined just 0.1% as did nominal orders. Year over year, however, instead of being up 0.6%, real new orders for core capital goods were down 2.6%. Compared to the pre-pandemic month of February 2020 nominal new orders for core capital goods were up 20.8% but real orders were up just 1.2%.

Trucking

Despite an apparent special regulatory enforcement effort that led to inflated figures during Thanksgiving week, the number of carriers exiting the market in November was slightly lower than it was in October, according to FTR’s analysis of Federal Motor Carrier Safety Administration data.

Net revocations of trucking authority – total revocations minus reinstatements of authority – totaled 6,886 carriers in November, down nearly 550 from the October level. Although lower than October and a few other months this year, the November level of net revocations was quite high relative to what was typical before the fall of 2022.

The elevated figures for last week apparently resulted from an effort by FMCSA to improve compliance with the requirement that carriers maintain a legal representative in each state. Most carriers do this by engaging what is known as a “blanket company” that provides a process agent for the carrier in each state. Approximately 50 companies are authorized to provide this service.

FTR understands that FMCSA has determined that some blanket companies do not maintain effective agents in each state and ordered carriers to find alternatives or face revocation of their authority.

This enforcement effort led to an unusually high number of revocations last week. FMCSA’s usual pattern is to issue a large number of authority revocations each Monday followed by much smaller numbers on other days of the week.

Last week, the agency revoked the authority of just over 1,000 motor property carriers on November 20, but then it revoked more than 1,500 more authorities on November 22. FTR’s analysis of the data indicates that nearly 1,000 of those November 22 revocations were clients of just four blanket companies that FMCSA has removed from its list of authorized providers on its website.

Carriers losing authority over process agents could obtain different blanket companies and have their authority reinstated. However, it is possible that many were no longer operating anyway, which might explain why they did not respond to FMCSA’s directive in the first place.

Meanwhile, the number of new for-hire carriers authorized by FMCSA continued to fall modestly. In November, the agency authorized 4,367 new for-hire trucking firms, down from nearly 4,900 in October and the lowest figure since June 2020. New entry is still ahead of the pre-pandemic norm but only by around 1,000 carriers per month on average.

With both net revocations and new entry falling by a few hundred from October levels, the net decline in the for-hire trucking firm population in November was nearly the same as it was in the previous month. The for-hire carrier population fell by 2,519 carriers, down slightly from the 2,574 net decrease in October. The carrier base has now fallen for 13 of the past 14 months, and the outlier – March of this year – was miniscule.

Dry Van Spot Rates

After seven straight weeks with only one week-over-week increase, dry van spot rates in the Truckstop system jumped by the most since May during the week ended November 24 (week 47). Broker posted rates for dry van equipment invariably increase during Thanksgiving week, so the failure to do so might have signaled further weakness. Refrigerated spot rates fell by about as much as dry van rates rose, and flatbed spot rates increased modestly. Refrigerated rates often decline during the holiday week, although this year’s drop was much larger than typical. Moreover, refrigerated rates had been essentially flat in the prior week, which is a week during which refrigerated rates usually rise significantly in the run-up to Thanksgiving.

Spot volume fell sharply, which is essentially meaningless during a week that includes a major holiday. However, it is notable that spot volume continues to lag far behind prior-year levels. Load postings were almost 19% below Thanksgiving week last year and nearly 39% below the five-year average for the week.

For more on week 47 spot metrics for truck freight, visit https://freight.ftrintel.com/spotmarketinsights.

Rail/Intermodal

Not surprisingly, rail carload and intermodal traffic fell sharply week over week during Thanksgiving week. The lone outlier in was pulp and paper, which rose 3.7%.

More significant were the y/y comparisons since that metric assesses volume in two holiday-impacted periods. Total carload volume declined 2.7% y/y (Continued from page 4) while economically sensitive freight was slightly weaker at down 3.3% y/y.

Some categories that were down notably y/y include farm products, coke, grain, and non-metallic minerals. Categories that posted notable gains y/y include metal scrap, metals and metal products, petroleum products, and motor vehicles and equipment.

While carload’s performance was a bit worse than last year’s Thanksgiving week, intermodal performed better than a year ago. Week over week, intermodal volume was down almost as sharply as carload, but year over year, intermodal traffic was up about 6%. After lagging comparable 2022 levels considerably all year, intermodal has performed at least as well as the same 2022 weeks since Labor Day week.

Intermodal trailer traffic fell more sharply week over week than did container traffic, and trailer weakness was a drag on overall intermodal volume y/y. Intermodal container volume was up more than 7% y/y, but intermodal trailer volume was down nearly 20%.