Weekly Transportation Update: Falling Gas Prices Ease Consumer Spending

Key Takeaways

• Consumer prices ease due mostly to gasoline.
• Total new manufacturing orders decrease.
• Wholesale inventories were less lean in November.
• Jobless benefit claims remain relatively low.
• Mortgage rates ease in the latest week.
• Diesel prices decline after one-week uptick.
• Truck spot rates fall after holiday surge.
• Intermodal volumes start the year off weak.
• Carload volumes aided by growth in coal, grain.
• Hedlund promoted to vice chair at STB.

Overview

The Consumer Price Index eased 0.1% in December for the first m/m decrease since May 2020, but falling gasoline prices were largely responsible. The gasoline index fell 9.4%. Inflation is decelerating in other key categories, however. The food index ticked up 0.3%, down from 0.5% in November. As recently as July, that index was up 1% or more m/m. One key consumer cost that is not easing is shelter. The shelter index rose 0.8%, up from 0.6% in November and matching the October gain. While food price growth decelerated in the second half of 2022, costs for shelter accelerated.

The 12-month change for the all-items CPI was 6.5%, which is down from 7.1% in November and the lowest y/y comparison since October 2021. Excluding the volatile food and energy sectors, the CPI increased by 0.3% in December, up from 0.2% in November. However, the core CPI gain was quite mild compared to the situation that existed before October when monthly increases frequently had been running around 0.6% for a full year. The 12-month change in the CPI less food and energy was 5.7% – the lowest since December 2021.

Total new orders for manufactured goods

New orders for all manufactured goods – both durable and non-durable – in November experienced their sharpest monthly decrease since April 2020, but the aircraft industry was the principal culprit. As discussed last week in the context of orders for durable manufactured goods, lower orders for both civilian and defense aircraft distorted the overall demand picture. Transportation equipment orders accounted for a full point of the decline. Total new orders excluding transportation equipment fell 0.8%, which is the largest decrease since July. The November decline is only the third m/m decrease since April 2020.

Although the aircraft industry pulled down durable goods orders, new orders for non-durable goods al-so were down notably, falling 1.4%. The decrease is the largest since April 2020 except for the 1.9% drop in July 2022. The Census Bureau data is not adjusted for pricing, so recent declines in prices for some key industrial commodities likely are factors.

Wholesale inventories and sales

An increase in inventories and a decline in sales in November resulted in an inventories-to-sales ratio for merchant wholesalers that matches pre-pandemic levels for the first time. The 1.35 ratio in November is slightly less lean than the 1.33 ratio in February 2020, but it equals the 2019 average. Sales for merchant wholesalers were down 0.6% in November, led by a 1.7% drop in sales of durable wholesale goods. The largest drop (4.9%) was in metals, followed by a 2.7% decrease in lumber and a 2.4% decline in automotive.

Sales of non-durable wholesale goods increased 0.4%, led by a 4% increase in farm products, which offset a 1.4% drop in petroleum. The Census Bureau data is not adjusted for pricing, so the gain in farm products and decline in petroleum likely are due largely to price changes.

Unemployment benefits

Despite numerous reports of layoffs at large companies, the nation’s unemployment picture is not reflecting that dynamic. Seasonally adjusted initial claims for unemployment benefits changed little in the latest week and continue at nearly the lowest level since September. Seasonally adjusted continued claims fell by 63,000 and were at their lowest level since mid-November.

Mortgage rates

Mortgage rates declined modestly after two weeks of small increases. The average rate on a 30-year fixed-rate mortgage in the latest week was 6.33%. Freddie Mac says the market remains “hypersensitive” to rate movements with purchase demand experiencing large swings relative to small changes in rates.

Diesel and petroleum prices

Diesel prices resumed their downward trend after a brief pause to begin the year. The national price of diesel declined 3.4 cents to $4.549 a gallon during the week ended January 9.

Underlying factors would suggest that price moves in the near term will continue to be modest. Crude is still trading mostly between $75 and $80 per barrel. Distillate inventories are largely stable at close to the highest levels since February 2022.