Weekly Transportation Update: September Strong for Production and Manufacturing

Key Takeaways

• Industrial production, manufacturing output rise.
• Housing starts fall in September.
• Sales of existing homes decline for eighth month.
• Mortgage rates edge higher. • Diesel prices increase nearly 12 cents.
• Truck spot metrics move seasonally.
• West Coast spot volume is lowest since May 2020.
• Intermodal volumes hold steady in the latest week.
• The grain harvest pushes up rail carload volume.
• Rail regulatory decisions are expected soon.

Overview

Industrial production in September saw only its second increase since April, rising 0.4%, seasonally adjusted. Based on updated data from the Federal Reserve, the IP decreases in May, June, and August were minimal at just 0.1% while the gain in July was 0.7%. Production now is the strongest of the pandemic era at 3.4% higher in September than in February 2020. Manufacturing output also increased 0.4% following a gain of the same scope in August and an even stronger gain in July. The only declines in manufacturing since January occurred in May and June, and output in September was the strongest of the pandemic at 3.8% above February 2020.

Motor vehicles and parts output has been volatile due to supply chain constraints, but it posted a gain of 1% in September after a 1.5% decline in August and a 3.6% jump in July. Automotive output in September was 0.9% higher than in February 2020. Mining output, which includes oil and gas extraction, resumed its upward trend in September, rising 0.6% after holding flat in August. Mining has seen mostly sharp increases since March, which correlates with the surge in crude prices related to Russia’s invasion of Ukraine. Mining output in September still has not matched pre-pandemic levels, but it was just 1.2% below February 2020.

Mortgage rates

Sales of existing homes

With prices high and financing costs surging, sales of existing single-family homes decreased for the eighth straight month in September. If there is any positive spin to the figures it would be that the decreases are decelerating. Sales of existing single-family homes declined 0.9% after declining 1.4% in August. Those are the smallest decreases since the streak began in February. Sales of existing single-family homes in September were 17.4% below the rate in February 2020. Inventories of homes for sale relative to the sales rate held at 3.2 months for the third straight month in September. While this is the highest level since June 2020, it is still below pre-pandemic levels. The 2019 average was 3.9 months. The median price of homes sold continued to decline after the June record of $420,900. The September median price was $391,000, down from $398,800 in August.

Diesel and petroleum prices

Following a week that had seen the third largest increase on record, the national average price of onhighway diesel continued to rise, moving up 11.5 cents to $5.339 a gallon. After falling about 97 cents in 15 weeks, diesel prices have surged more than 50 cents in just two weeks. Meanwhile, distillate stocks barely changed in the latest week. They were marginally higher than in the previous week but not enough to reduce pressure on prices. In fact, stocks of ultra-low-sulfur distillate on the East Coast – the region where inventories have been the most critically low – declined were very slightly in the latest week. Although diesel prices rose in all regions, the sharpest gains were in New England and the Central Atlantic, both of which saw price spikes of more than 40 cents a gallon. Inventories would appear to be the driving factor as crude prices are stable. West Texas Intermediate continues to trade mostly around a barrel $85.