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Weekly Transportation Update: Inflation Cools While Job Growth Impresses

Posted by The FTR Experts on 4/17/23 10:00 AM

Manufacturing output and retail sales fall while inflation cools.

  • The economy posts solid job growth in March as trucking employment looks   stronger.
  • EPA proposal would require major shift to zero-emission vehicles by model year 2032.
  • Truck spot market metrics soften in line with seasonal expectations.
  • Mexico factors into recent weakness in intermodal and rail carload volumes.

Tags: Economy, WTU

Key Takeaways

  • Manufacturing output declines 0.5% in March.
  • Retail and food service sales fall 1%.
  • The inventory situation changed little in February.
  • Energy and food tame inflation in March.
  • The U.S. adds 236,000 jobs in March.
  • Diesel prices fall for the 10th straight week.
  • Crude prices move a bit higher in recent days.
  • Trucking payroll employment looks stronger.
  • EPA proposes mandates for commercial ZEVs.
  • Spot rates and volume ease in the latest week.
  • Mexican traffic hits intermodal and rail carload.
  • CP and KCS formally merge operations.


Economic indicators released this week pointed to weaker activity in both the consumer and industrial sectors. Manufacturing output and retail sales both declined. However, inflation moderated at both the consumer and producer levels.

Minutes from the March 21-22 Federal Open Market Committee (FOMC) meeting released this week indicated that recent developments in the banking sector could lead to recession. The minutes state that Federal Reserve staff is projecting “a mild recession starting later this year, with a recovery over the subsequent two years.”


Industrial production and manufacturing

Industrial production (IP) increased 0.4%, seasonally adjusted, in March, but the gain was fully attributable to weather. Utilities output jumped 8.4% due to colder weather in March following a mild February. The other two major IP categories – manufacturing and mining – each saw declines of 0.5% m/m.

Within manufacturing, durables took the biggest hit, falling 0.9%. Motor vehicle and parts output fell 1.5%, which is the largest drop in four months. Non-durable goods output was nearly flat m/m, easing just 0.1%. Manufacturing output in March was down 1.1% y/y and was just 0.6% ahead of February 2020.


Retail and food service sales

Retail and food service sales in March fell 1%, seasonally adjusted, both in nominal and inflation-adjusted dollars, according to data from the Census Bureau and the St. Louis Fed. The latest data showed a small upward revision in February’s estimates, and seasonally adjusted sales for the quarter were still quite strong due to January’s 3.1% gain.

Gasoline stations posted the largest drop in sales at 5.5% due to falling prices. Excluding gas stations, retail and food services sales were down 0.6% m/m. Other notable decreases include general merchandise stores (-3.0%), motor vehicle and parts dealers (-1.6%) and electronics/appliances and building materials/garden supplies, both of which were down 2.1% m/m. Almost all retail sectors saw some m/m decline in sales, and the gains among those that saw increases generally were marginal. The lone exception was non-store retailers, which recorded a 1.9% increase m/m.

In current dollars, retail and food service sales were up 2.9% y/y and 31.5% ahead of February 2020. Adjusted for inflation, sales were down 1.9% y/y and up 12.9% since February 2020.


Inventories-to-sales ratios

Inventories relative to sales largely were stable in February throughout the supply chain. The total business ratio held steady at 1.36 as slightly leaner inventories in wholesale offset slight increases in the ratios for retail and manufacturing.

The increase of the retail inventories-to-sales ratio to 1.23 from 1.22 in January was due to the automotive sector. Excluding motor vehicles and parts, the ratio was unchanged at 1.14, which is the leanest ratio since March of last year.


Consumer Price Index

Falling energy prices and stable food prices offset almost all the consumer price inflation elsewhere in March as the all-items Consumer Price Index ticked up just 0.1%, seasonally adjusted.

The index for shelter represented the greatest contribution by far to the all-items CPI, although the 0.6% increase represented a deceleration from February. Although the food index overall was flat, location mattered. Food at home – i.e., grocery store items – declined 0.3% while food away from home rose 0.6%.

The all-items index increased 5.0% for the 12 months ended in March, which is the smallest 12-month change since May 2021.

Excluding food and energy, the CPI rose 0.4% m/m, which was down from 0.5% in February. In addition to shelter, items with rising prices included motor vehicle insurance, airline fares, household furnishings, and new vehicles.

The index for all items less food and energy increased 5.6% for the 12 months ended in March, which is up slightly from February but otherwise tied with January as the lowest since December 2021.


Producer Price Index

The Producer Price Index for final demand fell 0.5% in March for the largest m/m drop since April 2020. Goods – more specifically, energy goods – accounted for the decrease. Final demand goods fell 1.0%, including a 6.4% drop in final demand energy.

Producer-level inflation was tame even without the effects of falling energy prices, however. The index for final demand less foods, energy, and trade services ticked up just 0.1%, which is the smallest gain since one of the same scope in May 2020.

Pricing in freight transportation services generally was weaker m/m, but the decreases were relatively much larger in general freight truckload and freight brokerage than in other sectors. The PPI for general freight truckload fell 2.9% m/m and was down 16.6% y/y. The PPI for freight transportation arrangement dropped 3.2% and was down 25.2% y/y.

The LTL PPI was down 0.9% m/m and 2.2% y/y while the PPI for long-distance specialized trucking declined 0.6% but was still up 3.6% y/y. The rail intermodal PPI eased 0.3% but was up 4.9% y/y.


Employment situation

Total payroll employment in March rose by 236,000 jobs, seasonally adjusted – a solid m/m gain, albeit the smallest since a decline in jobs in December 2020. However, the increase was just barely below the 239,000-job gain in December 2022. Payroll employment is now just under 3.2 million, or 2.1%, above February 2020.

The labor participation rate continued to rise, ticking up a tenth of a point to 62.6%. The unemployment rate ticked down to 3.5%, indicating that the larger labor force did not mean a loosening of the labor market.

As is often the case, the sectors seeing the most job growth were those hit hardest by the pandemic: Leisure and hospitality, private education and health services, and government. The only sectors to see any job losses were construction, manufacturing, and financial activities, and construction was the largest of those at 9,000 jobs shed.

Within freight-related employment, couriers and messengers added 6,700 jobs in March, and revisions to January and February added 13,000 to the prior estimate. Payroll jobs are up 256,200, or 29.6%, since February 2020.

Warehousing continued to see weaker employment since the peak that occurred in June of last year. The latest month brought an 11,800-job drop, but seasonally adjusted employment is still more than 593,000 jobs, or 45%, ahead of February 2020. (For a discussion of trucking jobs, see the Trucking section below.)


Diesel and petroleum prices

The national average price of diesel eased 0.7-cent during the week ended April 10 for the 10th straight weekly decrease. Prices have fallen more than 52 cents a gallon during that period.

The national average of $4.098 a gallon is nearly 98 cents lower than it was a year earlier. Most regions saw larger price declines than the average as the large-volume Midwest region posted an increase of 1.6 cents a gallon.

Recent increases in the price of crude suggest that diesel prices might have bottomed out in the near term. West Texas Intermediate has closed above $80 a barrel in eight of the last nine trading sessions. The closing price of $83.26 on April 12 was the highest since November 16 of last year.





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