Overview
Unusually harsh winter weather in mid-January apparently distorted key seasonally adjusted economic indicators. The Federal Reserve cited winter weather as a factor in industrial production figures.
The Census Bureau does not offer analysis behind its economic indicators, but a major winter weather event in February 2021 correlated with a sharp drop in housing starts and retail sales as well as manufacturing output. The following month saw sharp gains, so distortions likely will continue until March.
The week also brought news of higher prices generally, but for freight transportation the price for one commodity was especially notable. Diesel prices rose by the most since July in the latest week.
Residential construction
Housing starts in January posted their largest m/m seasonally adjusted decrease since April 2020, but winter weather certainly was a factor. Housing starts plunged 14.8% to the lowest level since August, which also saw a sharp m/m drop. Starts were down 0.7% y/y in January.
Although starts were down for both single-family homes and housing units in multi-family dwellings (five or more units), multi-family starts suffered a much larger drop, plunging nearly 36% m/m. Single-family starts were down 4.7%. Multi-family starts were down about 38% y/y while single-family starts were 22% higher than January 2023.
Permits authorized for future residential construction show a similar pattern. Single-family permits were up 1.6% m/m while multi-family permits fell 9%. Compared to January 2023, single-family permits were up nearly 36% while multi-family permits were down nearly 27%.
The number of multi-family units under construction is still far higher than single-family units, but the market might have hit an inflection. Multi-family homes under construction have fallen in all but one month since August. An upturn in single-family homes is less clear, but the m/m decreases began to shrink last summer and homes under construction have risen in two of the last three months.
Diesel prices
The national average retail price of diesel jumped 21 cents to $4.109 a gallon during the week ended February 12. The increase was the largest since late July, and diesel prices on average now are above $4 a gallon for the first time since late November. Diesel prices have risen in three straight weeks after falling in 14 of the prior 18 weeks.
Prices rose in all regions, ranging from 2.6 cents a gallon in New England to more than 30 cents in the Midwest. Only New England and the Central Atlantic saw single-digit increases, but they already had the nation’s highest prices except for California.
Crude prices have edged slightly higher recently but seemingly not enough to explain such a sharp move in diesel Instead, recent volatility in inventories and production might be the underlying issue.
Trucking
Total broker-posted spot rates in the Truckstop system declined for the third straight week during the week ended February 9 (week 6) as rates fell in all equipment types.
Dry van saw the sharpest drop, producing the lowest weekly spot rate since the week before Thanksgiving. Refrigerated’s decrease was the smallest of the past three weeks but still substantial. Flatbed rates declined for a second straight week. Winter weather in week 3 might still have some lingering effects on spot rates, however.
For more on week 6 spot metrics for truck freight, visit https://freight.ftrintel.com/spotmarketinsights.
Rail/Intermodal
By a 4-to-1 vote, the Federal Maritime Commission this week affirmed an administrative law judge (ALJ) ruling that chassis agreements requiring motor carriers to use specific chassis providers violate the Shipping Act of 1984 in situations when an entity other than the ocean carrier is paying for use of the equipment. The FMC decision covers four regions at issue in the ALJ’s ruling: Los Angeles/Long Beach, Chicago, Savannah, and Memphis.
ALJ Erin Wirth handed down the initial decision in February 2023 in response to a complaint filed by the Intermodal Conference of the American Trucking Associations against the Ocean Carrier Equipment Management Association, Consolidated Chassis Management LLC, and 11 ocean carriers.
The proceeding is not over, however, as the ALJ must still determine what specific actions and, potentially, reparations will be required.
The FMC’s order, the ALJ’s initial decision, and the parties’ filings in the proceeding are available at https://www2.fmc.gov/readingroom/proceeding/20-14.
