The U.S economy grows in Q2, but the freight economy sinks.
The biggest stories of the week within freight transportation were a deal between UPS and the Teamsters, averting a strike, and indications that LTL carrier Yellow may be on the verge of shutting down.
The big economic news was a solid increase in Gross Domestic Product in the second quarter, but that strength most definitely did not show up in the portion of the economy that drives freight demand.
GDP and GDP Goods Transport
The U.S. economy grew for the fourth straight quarter during the second quarter of this year, offering no signs of a recession. Real Gross Domestic Product (GDP) rose 2.4% quarter-over-quarter (q/q) on a seasonally adjusted annualized basis.
Nearly half of the GDP growth resulted from stronger consumer spending, principally within the services sector. The second largest contributor was nonresidential private investment, led by equipment but also including structures. Government spending also was a notable factor.
Net exports were a marginally negative factor, but the breakdown is important. Goods exports were strongly negative, but good imports were strongly positive for GDP, which means imports were weak. Imports count as a negative in the GDP calculation. Another offsetting negative was residential fixed investment, although it was not a major factor.
The second quarter looked very different for the portion of the economy linked to freight, however. The decline in imports that significantly boosted GDP hurt the freight economy, and the gains in consumer spending were tilted heavily toward services.
The portion of the economy associated with freight transportation – what FTR calls the GDP Goods Transport Sector – fell 3% q/q on a seasonally adjusted annualized basis. The decrease was the fourth in five quarters, and growth in the first quarter of this year was quite weak at just 0.4%.
Consumer spending
Real consumer spending rose 0.4% m/m, seasonally adjusted, in June for the strongest increase since January. Real spending was up 2.4% y/y.
June’s strength was almost entirely attributable to goods. Real spending on services was nearly flat, ticking up just 0.1%. Services spending was up 2.5% y/y. Meanwhile, real spending on goods rose 0.9%, which is the strongest performance since January. Real spending on goods was up 2.1% y/y.
Real spending on durable goods jumped 1.7% mainly due to vehicle sales. Spending on non-durable goods rose 0.4% in June. Real spending on durable goods was up 4.7% y/y while real spending on non-durable goods was up just 0.6% y/y.
The personal savings rate declined to 4.3% in June from 4.6% in May.
Manufacturing orders
New orders for durable manufactured goods jumped 4.7%, seasonally adjusted, in June, but the aircraft industry skewed the data. New orders for civilian aircraft spiked more than 69%.
Excluding transportation equipment, new orders rose by a far more pedestrian 0.6%. New orders for core capital goods – non-defense capital goods excluding aircraft – ticked up 0.2% in June.
Sales of new homes
After rising in seven of the past eight months, sales of new single-family homes declined 2.5% m/m in June, seasonally adjusted. New-home sales were up 23.8% y/y, however.
The supply of new homes for sale increased to 8 months from 7.4 months. Inventories are the highest since March but still below the 2022 average.
Inventories
Retail inventories increased 0.7%, seasonally adjusted, in June. As has been the case frequently, the inventory gains were especially strong in motor vehicles and parts, which rose 1.5%. Excluding automotive, retail inventories increased 0.4%.
Total retail inventories in June were up 5.4% y/y, but inventories were down 0.8% excluding automotive. Automotive inventories were up 25.5% y/y.
Wholesale inventories declined 0.3% m/m in June but were up 1.7% y/y.
Diesel prices
The national average price of diesel jumped 9.9 cents to $3.905 cents a gallon during the week ended July 24. Prices were up in all regions, led by a 13.4-cent increase in the Gulf Coast region. The smallest increase was 1.9 cents in New England.
Further increases seem likely as crude prices are rising. West Texas Intermediate on June 27 closed above $80 a barrel for the first time since April 18.
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