Industry Indicators: April 11-17
Industry Indicators: April 11 - 17
iLevel Logistics presents intriguing data that offers a snapshot of notable industry changes and events during the week of April 11th through April 17th.
E-commerce rises – but there are consequences
Rising retail sales means more freight to haul. On March 21, national dry van spot rates reached $2.66, maintaining momentum from the past several months. For the week April 5-11, spot rates held steady at $2.65.
Increased demand pushed shipping rates up as well. Spot rate prices from China to U.S. (east and west coasts) continued to climb.
The future looks bright
Reuters reported on the summary of the Federal Reserve’s commentary on the economy – The Beige Book – an indirect measure of the direction of economic activity. Notice, over the past several weeks the words to describe the economy exhibit a notable shift in tone. Many more positive words now such as growth, improvement, optimism, and substantially fewer negative ones such as furlough and cuts.
Driving miles finally reach pre-pandemic levels
Source: TTNews
Another sign of a growing economy, weekly vehicle miles traveled on interstates increased to approximately 16.7 million. This is 1% higher than the same week in 2019. Early March 2020, before WHO declared a pandemic, was the last time interstate miles surpassed 2019 levels.
After the abrupt shutdowns in late March, April and into May 2020, miles traveled slowly began inching toward 2019 levels – the horizontal line at 0. A significant portion of the increase comes from trucking which rose 7% compared to the same week in 2019.
The consequences
Source: SupplyChainBrian
According to the Bureau of Labor Statistics, the rise of online shopping will produce closures of thousands of stores. Dozens of major retailers filed for bankruptcy in 2020, including big names like J.C. Penny and Lord & Taylor. Significant shares of clothing stores, electronic and home furnishing outlets will likely close, as will office-supply retailers.
The report’s lead analyst, Michael Lasser, summed it up well: “An enduring legacy of the pandemic is that online penetration rose sharply. We expect that it will continue to increase.”
Malls on the Ropes
Source: CNBC
As consumers turned to Ecommerce, vacancy rates for regional malls climbed and reached a record 11.4% in 2021 Q1. The 90-basis point jump was the highest recorded, surpassing the 80-point spike in 2009 Q1. As Moody’s Victor Calanog observed, “Malls are absolutely still on the ropes.”
But malls may not sit empty for long. NBC News reports that over the last several months, Amazon has started purchasing malls across the country, turning them into distribution centers.
Inventories low
Source: SupplyChainDive
Compared to sales, inventories dropped dramatically in 2020. This creates pressure across the supply chain. Businesses demand inventory to keep pace with consumers expectations for quick delivery. Chronic undersupply and increased demands lead to bottlenecks (witness LA ports) and growing frustrations. Analysts expect this to continue into summer and fall.
More imports mean more empties
Source: freightwaves
The results of rising consumer demand are reflected in the ‘madness’ of empties – empty containers loaded on ships and returned to Asia. In LA ports, the largest ever number of empties were loaded in March. There is now a 4 to 1 gap between empty containers and full exports containers.
Why does this happen? Port of LA’s Gene Seroka responded, “It’s quicker to get the empties onto the ships and to the next point of origin in Asia to recycle them and have them come back as imports than it would be for the additional transit time to reach U.S. exporters here and then deliver exports to Asia consignees on the other side of the Pacific.”
In other words, right now, the supply chain is irrational – inefficiency is rewarded.
Fuel prices a legitimate concern
Source: Overdrive
As economic activity increases and demand for freight grows, owners of small trucking firms are particularly concerned about surging fuel costs. When asked which expense item they expected would increase the most in 2021, 53% said fuel.
Fuel prices have in fact shot up the past several months, eclipsing pre-pandemic marks in 2019. The depressed prices that characterized the early pandemic months appear over.
At what levels will fuel prices plateau? More generally, will we see widespread inflation?
And that’s it for this week. Thanks for reading.
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