Overview
Almost all economic indicators for June are now in, and except for home sales, economic indicators were stronger m/m. As noted last week, even the flat performance in retail sales was stronger than it seemed. The second quarter as a whole saw solid economic growth, and the gains mostly occurred in areas that support freight volume.
Consumer spending adjusted for inflation rose in June. New orders for durable manufactured goods fell sharply, but they increased if you exclude extraordinarily poor performance in just one manufacturing industry.
Gross Domestic Product
U.S. economic growth exceeded expectations in the second quarter, and the portion of the economy linked to freight transportation posted an even stronger gain.
Real Gross Domestic Product (GDP) rose 2.8% quarter over quarter (q/q) on a seasonally adjusted annualized basis – double the growth during the first quarter. Since the end of 2021, only two quarters – the third and fourth quarters of last year – have seen stronger growth.
The major drivers of GDP growth were consumer spending, inventories, and non-residential fixed investment, especially in equipment. Among the offsets were higher imports, which count as a negative in the GDP calculation.
Although consumer spending rose, the gain in services was considerably stronger, led by real spending on health care. The gains in real spending on goods were led by durable goods, including motor vehicles and parts, recreational goods and vehicles, and furnishings and durable household equipment.
The portion of the economy linked to freight transportation – what FTR calls the GDP Goods Transport Sector (GTS) – saw even more robust growth, rising 5.3% q/q annualized. While GTS received no help from the gain in spending on services, it benefitted from the increase in imports of goods, which was a negative for GDP, as noted.
The growth in both GDP and GTS exceeded FTR’s forecasts, which had been 1.9% and 3.7%, respectively. We currently are forecasting GDP growth of 2.4% in 2024 and 1.9% in 2025, although the strong performance in Q2 might lead to changes in the growth outlook.
The current GTS forecast is 2.5% growth this year and 2.8% growth in 2025. GTS is a broad measure of the freight economy, and its growth tends to outpace actual freight volume growth due to the mix of goods seeing growth in spending. As noted below, one of the strongest gainers in June was a goods category that generates relatively little freight.
Consumer spending
In a rare occurrence, goods and services contributed equally to spending growth in June when adjusted for inflation. Real consumer spending ticked up 0.2% m/m, seasonally adjusted. Spending was up 2.6% y/y, which is the same as May’s comparison.
The 0.2% increase in real spending on goods followed a modest upward revision of prior months’ figures. Real spending on goods was up 2.3% y/y. Real spending on durable goods dipped 0.2% while real spending on nondurable goods rose 0.5%.
Within services, the largest contributor to growth was housing and utilities. Even though overall durable goods spending dipped, one durable goods category – recreational goods and vehicles – was the largest contributor to goods spending growth, led by information processing equipment.
More specifically, real spending on computer software and accessories rose 1.1% in June after a May jump of 5.2% – the largest increase since June 2021. Computer equipment in general does not generate much freight in relation to its value, but that is especially the case with computer software, which typically is simply downloaded.
Sales of existing homes
Sales of existing single-family homes fell 5.1% in June for the largest m/m decrease since November 2022. Sales were down 4.3% y/y.
The sharp drop in sales resulted in an increase in the inventory of existing homes at the current sales rate of 4.0 months, which is the highest level since May 2020. Even so, the current inventory level relative to sales is in a normal range versus what was typical prior to the pandemic.
Another milestone in June was the record $432,700 median price of an existing single-family home sold, topping the prior record set in May. The National Association of Realtors data is not seasonally adjusted, and peaks in median home prices tend to occur in June.
Trucking
Broker-posted spot rates in the Truckstop system continued to ease as expected during the week ended July 19 (week 29), but rates for both dry van and refrigerated equipment remain higher than they were during the same week last year.
The week-over-week decline was expected. The last time either dry van or refrigerated experienced any meaningful increase in spot rates during week 29 was 2009. Flatbed spot rates, which also declined week over week, were up nearly 1% y/y for the first positive y/y comparison since late July 2022.
For more on week 29 spot metrics for truck freight, visit https://freight.ftrintel.com/spotmarketinsights.
Rail/Intermodal
Total rail traffic was down 0.1% y/y for the week ended July 20, according to the Association of American Railroads. Carloads have struggled in recent weeks due to the mid-week July 4th holiday, which was compounded by the effects of Hurricane Beryl in the central portion of the southern U.S.
While many carload commodities have recovered from these events, many others continue to drag. Total carloads for the week were down 4.1%. The markets with the greatest y/y increases include farm products (16.4%), grain mill products (13.7%), and petroleum products (13.3%). Those with the greatest y/y decreases include coke (27.4%), autos (18.1%), and crush stone, sand and gravel (15.1%).
Intermodal traffic has returned to normal levels after two weeks of extreme y/y increases. Those increases are primarily attributable to the port strikes in British Columbia last year, which manifested in the form of a weak 2023 and a strong 2024 by comparison. Overall intermodal traffic grew 3.9% across North America. This equates to container growth of 5.3% y/y – the lowest growth rate since January, and another bleak week for trailers, down 25.7% y/y.
YTD, total rail traffic is up 2.3% with carloads down 3.3% and intermodal up 8.1%. Of the 10 commodity carload groups reported by AAR, five show positive YTD y/y growth, up from four last week. These commodities include petroleum products (8.8%), chemicals (4.4%), grain (2.8%), motor vehicles & parts (0.2%), and, most recently, farm products (excl. grain) (0.2%).
