Overview
The economy continued to post solid growth in the final quarter of 2023, and the portion of the economy linked to freight transportation was solid as well. Meanwhile, sales of new homes in December recovered most of the decline suffered in November.
Within freight transportation, the data for last week was skewed by widespread severe winter weather, which spurred sharp increases in truck spot rates and slammed rail and intermodal volumes.
Consumer spending
Americans’ spending in December rose sharply for a second straight month, led by especially by spending on goods. Adjusted for inflation, overall spending increased 0.5% m/m, seasonally adjusted, which matches the increase in November.
Real spending on services moved up 0.3% while real spending on goods jumped 1.1%, which is the strongest increase since January 2023.
Robust gains in goods spending frequently have been due to motor vehicle sales, but that was not the case in December. The largest contributor was recreational goods and vehicles, led by software, which clearly does not have nearly as much impact on freight volumes as autos and light trucks. A similar category – information processing equipment – had led growth in November.
On the other hand, November’s growth in services spending had been led by food services, which obviously has a greater impact on goods transportation than most categories of services. The December gains in service spending were led by health care and by financial services and insurance.
Real spending on durable goods rose 1.5% in December following a 1.1% increase in November. Although spending on non-durable goods was not as strong it was still robust at a 0.9% increase.
Given strong spending growth, a decrease in the saving rate was not surprising. The personal saving rate – personal saving as a percentage of disposable income – fell to 3.7%, which is the lowest level in a year.
Sales of new homes
Sales of new homes increased in December for only the second m/m gain since July. Sales of new single-family homes rose 8% following a 9% drop in November. The latest data softened the initially reported decrease for November, which had been more than 12%. December sales were up 4.4% y/y.
While inventories of new homes are tighter than they were during the second half of 2022, they remain elevated compared to the pre-pandemic norm. The supply of new homes at the current sales rate declined to 8.2 months in December from 8.8 months in November. The average from 2015 through 2019 had been 5.6 months.
One of the major headwinds for sales of both new and existing homes has been affordability, but the challenge appears to be easing. The median sales price of a new single-family home sold during December was $413,200. While that figure is still nearly 25% higher than it was during the pre-pandemic month of February 2020, it is the lowest median price since December 2021.
Another boost for home sales should come from recent declines in mortgage rates. In the latest week, however, the average rate on a 30-year fixed rate mortgage rose nearly a tenth of a point to 6.69%, according to Freddie Mac.
Trucking
Extreme cold and other severe winter conditions likely were the cause of a jump in broker-posted rates in the Truckstop system during the week ended January 19 (week 3). Spot rates were up for all equipment types, and both dry van and refrigerated reversed their typical January slump following the usual late December surge.
Refrigerated spot rates posted the largest increase, and dry van rates basically offset the losses during the first two weeks of the year. Flatbed rates added to the prior week’s gains.
The total broker-posted rate rose 7 cents, which is the largest increase since May except for the one during the final week of 2023. Rates, which were at their highest level since the end of June, were 2.5% below the same 2023 week, and just 0.3% below the five-year average. The y/y deficit was the smallest since July 2022.
Total load activity rose 3.9% after surging nearly 22% in the prior week. Total volume was up 4.3% compared to the same 2003 week. Volume had not been positive y/y since March 2022. Load postings were about 21% below the five-year average.
For more on weeks 3 and 4 spot metrics for truck freight, visit https://freight.ftrintel.com/spotmarketinsights.
Rail/Intermodal
The Service Transportation Board this week issued a final rule amending its emergency service regulations to provide immediate relief for shippers in specified situations. The final rule clarifies that STB may act on its own initiative to direct emergency rail service, and it establishes an accelerated process for acute service emergencies.
The board proposed the rule in April 2022 following widespread complaints from shippers and other stakeholders over inconsistent rail service. Shippers had argued that existing regulations governing expedited relief were inadequate and that the process was so prolonged that they rarely used it even when facing major adverse consequences.
The final rule on emergency service is published at https://www.federalregister.gov/d/2024-01365.
In announcing the rule, STB confirmed that the final rule modifying its emergency service regulations was not a substitute for its ongoing consideration of whether to adopt the reciprocal switching rule changes that were proposed in September.
