Weekly Transportation Update: Auto and Light Truck Sales Decline But Remain Above 2022 Average

Key Takeaways

• U.S. Imports from North America remain very high.
• Vehicle sales ease but are above 2022 average.
• Wholesale inventories are still high versus sales.
• Initial jobless claims highest since October 2021.
• Diesel prices fall for the seventh straight week.
• Adjusted specialized trucking revenues rose in Q1.
• CDL hiring activity declines in April.
• Drug clearinghouse has culled 100,000 drivers.
• ATRI eyes options for handling marijuana use.
• Truck spot rates change little in the latest week.
• Rail volumes mostly follow seasonal expectations.
• Pennsylvania rail shippers settle dispute with lines.
• West Coast ports face disruptions from ILWU.

Overview

This week was relatively light on economic indicators, and none of the data released significantly changed our view of the freight markets or the broader economy. Volumes fell sharply in rail and in the trucking spot market last week, but the decline is entirely attributable to the Memorial Day holiday.

International trade

U.S. imports of goods from Mexico and Canada eased in April on a not seasonally adjusted nominal-dollar basis while imports from China moved slightly higher, but the wide disparity between North America and China continues. Through April, imports from North American trade partners is up more than 2% y/y in 2023 while imports from China are down nearly 26%. Imports from Mexico through April are up 5.8% y/y; Canadian imports are down 1.5%.

Although Mexico and Canada combined always account for more dollar-value imports, until February China consistently had been the largest single country for imports – typically by a wide margin. China’s lead as the single largest exporter to the U.S. narrowed in 2022, and the combined dominance of Mexico and China rose sharply. Since February, Mexico has been the largest source of U.S. imports and Canada has been second.

Some analysts have pointed to these trends as a sign of increased near-shoring in response to the pandemic’s severe disruption of industrial output in China and other factors. While some near-shoring surely is occurring, the divergence in import activity probably is attributable more to a combination of intra-Asia shifts in sourcing and, especially, to changes in demand for specific commodity types.

Imports from China are heavily oriented toward consumer goods while the automotive sector represents a big share of imports from Mexico and Canada. Vehicles and parts accounted for about 30% of the value of all U.S. imports from Mexico in 2022.

Those distinctions matter because imports of consumer goods have been much weaker recently while auto imports have been much stronger. Through April, consumer goods imports are down 12.5% y/y while vehicle and parts imports are up 13.8%. Both categories were higher m/m in April, but automotive imports rose 5.7%, seasonally adjusted, while consumer goods imports were up just 2.8%.

Vehicle sales

After jumping in April to their highest level since May 2021, sales of automobiles and light trucks reverted to basically the same level seen in February and March. Sales fell 6.5% m/m in May and were down 9.4% compared to the pre-pandemic month of February. However, vehicle sales were up nearly 20% y/y, and the 15 million seasonally adjusted annual rate was still well above the 13.8 million average during 2022.

With strong sales, output has risen. The Federal Reserve next week will report industrial production figures for May, including production of motor vehicles and parts. The preliminary April data showed the highest seasonally adjusted output in the history of the data series.

Wholesale sales and inventories

Inventories in the wholesale trade sector technically were leaner in April than in March, but the change was marginal. The inventories-to-sales ratio ticked down to 1.4 from March’s 1.41, which is the highest that the sector has ever seen aside from the pandemic lockdown months of April and May 2020. Highly inflated inventories relative to sales suggest a high risk of an inventory correction in the wholesale sector, but as of now absolute inventory levels have largely held steady this year.

Unemployment benefits

First-time claims for unemployment benefits jumped by 28,000, seasonally adjusted, in the latest week to 261,000, which is the highest level since late October 2021. However, ongoing claims for benefits fell by 37,000 to 1.76 million, which is the lowest level since mid-February.

Diesel prices

The national average price of diesel dropped 5.8 cents to $3.797 a gallon during the week ended June 5. The decrease, which was the largest in five weeks, was the seventh in a row and 17th in the past 18 weeks. Prices on average fell in all regions. The national average price is down nearly 83 cents over the past 18 weeks and more than $2 since hitting a record nearly a year ago.