This week’s data indicated a strong economy. In the third quarter, the U.S. economy recorded its largest gain in nearly two years. Consumer spending was solid. Sales of new homes rose sharply.
The week’s data was not without some warning signs, however. Mortgage rates rose yet again, and continued claims for unemployment benefits rose to their highest seasonally adjusted level since May.
Real consumer spending rose 0.4% m/m, seasonally adjusted, in September. The growth in real spending was the strongest since July and otherwise the strongest since a 1% jump in January.
Real spending on goods outpaced spending on services, rising 0.5% compared to the 0.3% increase in services spending. The largest contributors were both new and used motor vehicles and parts and other non-durable goods, led by prescription drugs.
Real spending on durable goods surged 1.1%, while non-durable goods ticked up 0.2%.
Personal income as a share of disposable income– i.e., the personal savings rate – fell to 3.4% from 4.0% in August. The personal savings rate was the lowest since November 2022.
Sales of new homes
Sales of new single-family homes jumped 12.3%, seasonally adjusted, in September to the highest level since February 2022. The m/m increase was the largest since August of last year, although it followed an 8.2% drop in August of this year. Sales were up 33.9% y/y.
Strong sales yielded a further decline in the inventory of new homes on the market at current sales rates. In September, the new-home inventory fell to 6.9 months, which is the lowest since February 2022. As recently as July of last year, the inventory of new single-family homes was more than 10 months, which was the highest since early 2009.
Although sales of new homes have been volatile, they generally have been rising over the past year unlike sales of existing homes, which have fallen in 19 of the past 20 months. The disconnect between new and existing homes likely relates to availability.
Given high prices and mortgage rates, many would-be sellers are on the sidelines because they cannot afford to replace their existing homes with much more expensive ones. That hurdle does not exist with newly built homes.
Broker-posted spot rates in the Truckstop system were down for the third straight week during the week ended October 20 (week 42). After six straight weeks of decreases, refrigerated spot rates rose modestly. However, flatbed spot rates declined, and
dry van spot rates were essentially unchanged week over week. Total spot rates are moving in line with seasonal expectations slightly below the five-year average for the week.
The total broker-posted rate eased 1 cent after being down a fraction of a cent during the previous week. Rates were nearly 12% below the same 2022 week and more than 4% below the five-year average. Total market rates have decreased in five of the
past six weeks but are moving as expected during the period between Labor Day and Thanksgiving.
Total load activity declined 2.9% after falling nearly 5% during the prior week. Volume was nearly 19% below the same 2022 week and more than 26% below the five-year average for the week.
For more on week 42 spot metrics for truck freight, visit https://freight.ftrintel.com/spotmarketinsights.
Carload volumes bounced back in the latest week after a dip two weeks ago to the levels they were holding two weeks ago and have held for much of the last month. The quick bounce back suggests a stability in volume that provides a safety net against
the volatility that has permeated through the individual carload sectors in recent years.
Stability is not a good thing for all sectors of the carload business, however. Grain volumes have leveled off in the latest week, indicating a seasonally normal harvest, but not a bumper crop so far as rail loadings hold at their five-year average levels.
Pulp and paper also is holding at the low levels set two weeks ago that are the lowest set in 2023. It is unlikely that pulp and paper volumes will bounce back strongly in the next few weeks.
Intermodal traffic moved up sequentially in the latest week, moving higher than its post-Labor Day peak season bump and indicating a bit of further strength. The intermodal traffic surge is likely to be short-lived, however, as volumes typically start to
decline just before the Thanksgiving holiday.
Intermodal volumes likely will struggle until after the Lunar New Year once they begin to decline in the coming weeks. While the recent volume is strong relative to where volumes have been this year, they also are roughly inline with 2022 results that were
less than stellar in a historical context.