Weekly Transportation Update: Falling Fuel Prices Hit Wholesalers Hard

Key Takeaways

• Wholesalers’ sales decline due to fuel prices.
• Diesel prices decline 3.1 cents after a big jump.
• Crude sinks to lowest price since January.
• Mortgage rates are highest since November 2008.
• Continued jobless claims are highest since April.
• Q2 trucking revenues were uniformly robust.
• Truck spot rates rise in key segments.
• Rail’s labor disputes head toward deadline.
• Carload volumes again are driven by coal.
• Intermodal volumes hold near five-year average.

Overview

Sales of merchant wholesalers in July fell 1.4% –the first decrease since August 2021 and the largest since April 2020 – but the culprit was falling gasoline and diesel prices. The Census Bureau’s data is adjusted for seasonal variations and trading-day differences but not for price changes. Wholesaler sales were up 15.3% y/y, which is the smallest comparison since February 2021.

Sales of petroleum products plunged 9.1% in July. Excluding petroleum products, which is by far the largest wholesale category, sales were essentially flat in July. However, petroleum was not the only notable category for a decline. For example, apparel wholesale sales were down 2.4%. Among non-durable goods, the largest decline was in metals, which were down 1.6%. The largest gains were in alcohol, up 3.2%, and electrical, up 2.6%.

Wholesale inventories relative to sales were less lean in July at a ratio of 1.29, up from 1.26 in June, but petroleum products were the reason. Excluding petroleum, the inventories-to-sales ratio for merchant wholesalers was basically unchanged at 1.47. In absolute terms, wholesale inventories increased 0.6%. The largest gain was in apparel, which saw inventories jump 5.2%. With sales falling during the month, the inventories-to-sales ratio for apparel swelled to 2.88 from 2.67 in June.

Wholesale inventories are far less lean than they were a year earlier. The total inventories-to-sales ratio in July 2021 was 1.19. The ratio excluding petroleum was 1.32. The inventories-to-sales ratio for apparel in July 2021 was 1.69.

Fuel and petroleum markets

The big jump in diesel prices two weeks ago was not the beginning of a trend. During the week ended August 26, the national average price of on-highway diesel had jumped 20.6 cents to $5.115 a gallon after nine straight weeks of decreases totaling more than 90 cents a gallon.

During the week ending September 5, the national average price of diesel decreased by 3.1 cents a gallon. The average price was down in all regions, led by the Lower Atlantic and Midwest at around 4 cents. The Rocky Mountain region saw a minuscule decrease of just a tenth of a cent. The national average price of $5.084 a gallon is still more than $1.71 above the same week last year.

Meanwhile, crude prices have drifted downward in recent trading. On September 7, West Texas Intermediate closed at $81.94 a barrel, which is the lowest closing price since January 11. Crude prices closed up $1.60 on the following day.

Mortgage rates

Mortgage rates have risen just over three-quarters of a point in three weeks and now are the highest in nearly 14 years. The average rate on a 30-year fixed-rate mortgage increased 0.23-point to $5.89% in the latest week, according to Freddie Mac. The average rate is the highest since November 2008.

Unemployment benefits

After rising in five of the last six weeks, continued claims for unemployment benefits are the highest since early April. The gains have occurred as initial claims for benefits generally have been on a downward trend for the past seven weeks.