Weekly Transportation Update: Inflation Eases But Remains a Worry

Key Takeaways

• Inflation eases in some areas in October.
• Wholesaler sales increase 0.4% in September.
• Wholesale inventories rose in line with sales.
• The national average diesel price edges higher.
• Truck spot market was sluggish in the latest week.
• Intermodal sinks due to western carrier weakness.
• Carload volumes were helped by gain traffic.
• Labor disruptions get pushed into December.

Overview

Overview Consumer inflation showed limited signs of abating in October, according to Consumer Price Index data released Thursday by the Bureau of Labor Statistics. The equities markets reacted extremely positively to a notable drop in the 12-month change for the all-items CPI, which fell to 7.7% from 8.2% in September. However, the m/m increase was unchanged from September, and some key sectors saw no relief at all. With all-items inflation not easing m/m, the principal factor in October’s decline in the 12-month change is that strong inflation increasingly is becoming part of the baseline.

While many observers are taking comfort that inflation is at least no longer accelerating, nor are their signs of significant relief from high prices. In the m/m change, about the best news was that the increase in the food CPI was the smallest of 2022 so far at 0.6% following modest deceleration over the prior two months. However, the CPI for shelter accelerated to 0.8% from 0.7% in September. The index for shelter contributed more than half of the entire monthly all-items increase. This is troubling news for consumers as pricing for shelter tends to be stickier than that for food. Core CPI – the CPI less food and energy – saw some deceleration m/m at an increase of 0.3%, which matches July and March for the slowest growth over the past year. However, the core CPI was distorted by a big drop (2.4%) in the CPI for used cars and trucks. The 12-month change in the core CPI was 6.3%, which is down from 6.6% in September. The September 12-month change had been the highest since August 1982. Wholesale sales and inventories After holding flat in August, sales for merchant wholesalers rose 0.4% in September to $700 billion. Sales were up 14.4% y/y and 38.8% higher than they were in February 2020. However, the Census Bureau data is not adjusted for inflation, so those comparisons would be far weaker in real terms.

Notable increases in September included a 5.9% gain in automotive products, a 1.6% increase in electrical equipment, and a 1.7% increase in professional equipment. Notable decliners include a 5.2% drop in metals and a 2% decrease in lumber. Wholesalers’ inventories ticked up 0. 6% in September. The inventories-to-sales ratio was unchanged at 1.31. Inventories have steadily become less lean since dropping to an inventories-to-sales ratio of 1.2 in January. The ratio is still slightly below that in place immediately before the pandemic. Diesel and petroleum prices The situation with diesel prices in the latest week depended greatly on geography. Nationwide, the average price of diesel increased 1.6 cents to $5.333 a gallon during the week ended November 7. For diesel buyers in the East, however, it was a much tougher week. In the Central Atlantic, the average price was up 10 cents, and in New England, diesel prices were up 11.3 cents. While California is still the only place where diesel is above $6 on average, parts of the East Coast are getting very close. The average price is $5.965 in New England and $5.977 in the Central Atlantic. The factor that appears to be driving higher prices in the east – tight inventories – changed little in the latest week. Meanwhile, crude continues generally to trade between $85 and $90 a barrel.