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US Freight - Trucking, Rail, all of it - Goes to Heck
Transportation is a gauge into how well the real economy is doing. And it just keeps getting worse.
In October, the number of freight shipments in North America fell from September, in line with the patterns of the past few years, but it fell more sharply than before. And year-over-year, shipments dropped 5.3% to hit the worst level for October since 2011, according to the Cass Freight Index, after having already plunged in the prior month to the worst level for a September since 2010.
Cass put it this way:
This month’s decline was much sharper than in recent years and can be directly correlated to falling imports and exports as well as decreased domestic manufacturing levels. Burdened by bloated inventories, and under the shadow of a possible interest rate increase by the Federal Reserve, businesses cut back on new orders placed in the last three or four months. This is resulting in lower import volumes, less freight to move, and faltering industrial production. With the dollar still strengthening, export growth decelerated in the third quarter.
With the exception of January and February, the index has been lower year-over-year every month, which makes for a very crummy year:
The index is broad. It tracks shipment data from all kinds of companies, no matter what mode of shipping they choose, including truck and rail. But it does not cover bulk commodities, such as oil, wheat, coal, etc. It’s based on “$26 billion in freight transactions processed by Cass annually on behalf of its client base of hundreds of large shippers,” as Cass explains. These shippers form a “broad sample” in all kinds of sectors, including consumer packaged goods, food, automotive, chemical, OEM, heavy equipment, and retail.
Ah, retail…. Retailers are already blaming the debacle on the weather.
Macy’s was the latest retailer to confirm why transportation is having a hard time: revenues dropped 5% as earnings plunged 46% in the quarter ended October 31. While at it, it lowered guidance for the year, with sales at stores open at least one year declining 1.8% to 2.2%.
"Spending by domestic customers remained tepid, especially in key apparel and accessory categories,” said CEO Terry Lundgren. He also blamed tourists that weren’t digging deeply enough into their pockets. Its shares plunged 14% on Wednesday and are down 44.6% from their high in July. Party over.
Companies across the US have been dogged by these sorts of unpleasant revenue declines. And where revenues are from selling merchandise, rather than services, the story involves transportation.
Commenting on my article a month ago about the freight debacle in September, “Harvie” supplied some boots-on-the-ground color:
I own a fleet of 15 trucks that go on the road delivering all kinds of freight, and I can tell you it’s extremely slow. This should be our busiest season for the 4th quarter but it feels like it’s January. With the price of diesel being low and low amounts of freight moving, the rates for all truck loads have dropped significantly. Meanwhile our insurance payments increase every year.
I’ve spoken to numerous freight brokers also, and they say the same.
This comes at the totally wrong time. Trucking was booming in 2014. Capacity was squeezed. Rates were rising. Trucking companies went on a buying binge. Then came 2015, and now trucking is suddenly slowing down.
But it’s not just in trucking. This is what Cass said about rail shipments – note the plunge in intermodal (containers):
The Association of American Railroads reports that October traffic was down 4.3% from 2014 levels. More importantly, though, is that carloads dropped 20.7% and intermodal fell 20.3% from the previous month.
Rail has been hit particularly hard by the rapid drop in industrial commodities caused by the steady decline in industrial production. Coal, petroleum, and ores were down, while grain was up. The reductions in energy production are being felt throughout the freight community as shipments of not only petroleum, but also pipe, water, sand, and other drilling materials have dropped off significantly.
Some commenters on my mid-October article added some granular details: “Also noticing CSX freight cars sitting idle again like was happening in 2009.” And “Tuba” observed: “I take an annual train trip to Reno, NV. One of the stops is Grand Junction Colorado. Normally this is a mostly abandoned very large train yard. This year I was surprised to see hundreds of idled Union Pacific locomotives as far as the eye could see.”
Declining shipments and “abundant capacity in the trucking sector” are pressuring spot rates all around, and so freight payments by shippers “plummeted,” as Cass said, 8.7% year-over-year and hit the lowest level for an October since 2011:
Cass finds that the lousy Q3 GDP growth “was indicative of the economic headwinds facing the economy.” Among them, the strong dollar, “the weakening world economy,” and this:
Inventory levels remain a looming problem as the Federal Reserve has been actively hinting that an interest rate hike is very possible in December. The combination of record inventory levels and an interest rate increase will cause a significant hike in inventory carrying costs. This will most likely drive a drawdown much like the one we saw in 2009 and 2010.
It’s unnerving how these references to the Great Recession keep cropping up at every twist and turn these days.
So who is going to pull the global economy out of its funk? No one knows. But it’s not going to be China. That’s what China’s trade fiasco is saying. Read… China Trade Swoons, Collapse of Containerized Freight Index Hits Worst Level Ever, Global Slowdown Worse than Forecast
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About about 10 years ago I was working at a shipping warehouse. Trucks rolling in an out all hours of the day. Even then the EPA and DOT were squeezing the trucking industry. DOT was demanding higher milage and the EPA was demanding rediculus low emmsions. This lead to really high temperature requirement for diesel truck engines and that required exotic materials for the engines. Which ran the cost of the engines way up and was pushing the instalation of auxillary engines to provide power for heating or airconditioning for sleeper cabs.
Some of the trucking companies were buying used reconditioned trucks that were grandfathered in and nursing them along. I'm pretty sure they are gone now.
"Truckin'... got my chips cashed in..."
Last data I saw on diesel demand was -11% since 2008. When you consider the population (thanks to the floods of immigrants) is growing at 2% per year what else do you need to see on a crappy economy metric. Yow Yow Yow natural gas conversions....except that is not happening at any scale. Rail and Trucks slip slidding away.....
BTW Warren Buffet FOAD.
Might I suggest a clue?
ttps://app.box.com/s/hfgvcqg7gqh7i27at6sv53ywu87lwarp (Read Me First)
You have a better alternative? Then STFU and get on board!
It must all be drones now and only Amazon is making money.
...lol
Always increasing debt has pulled demand from the future to present for over 30 years. Now that debt saturation has been reached, now is that future.
Plus, lower demand and lower consumption is good. That's called "getting closer to living within your means". Well, it would mean that except people still aren't living within their means... they're just stuck spending much of their income making payments on prior loans.
DEFLATION == GOOD.
LOWER DEBT == GOOD.
LOWER PRICES == GOOD.
DEBT and BANKSTERS == HORRIBLE.
All true.
But Buttfuck Barry said everything is awesome and he's the best ever
That ignorant antagonist dirty cocksucker is catcher
there should be some great deals on Chinese made crap just before Christmas. And just after. Wife and I know we don't need a damn thing so we don't bother buying each other tchotchkes. We have a safe home in a well armed area surrounded by like minded people. Food and water is plentiful and the great unwashed rabble is about a 4 hour drive away which means a hell of a walk. With a clear field of fire out front and a zeroed in scope, we're good. bring it on shit birds.
"we're good"
Well, in that case, you really should consider thoughtful gifts for each other. You should buy your wife something really special and rare right now - 22LR.
nofluer, if your comment was in response to mine ... to make it simple, there are two types of trucks, ones who transport container cargo, and everything else. Houston is one of the largest ports in the world, if my picture will post (it doesn't show up in the preview) here is a container ship to show you what shipping containers look like:
Ships transport empty containers in the back, and loaded ones forward. (This ship had some problems at sea, obviously they lost some empty ones, and there was some other problem, maybe a fire, midships.) Since Houston is a major port many, if not most, of the trucks (and trains) around here transport containers to and from ports.
I have lived and traveled all over the USA and only seen trucks waiting like I saw this morning when they were waiting out *really* crap weather. Most of them were not container trucks, I didn't see a pattern in the cargo type, it was really strange.
If anybody knows what this was about please post something (I don't know if Wolf monitors comments his posts here, and he is in SF)
Only "contributors" (up top of the page) get picture posting capability, so you're better off putting it up on imgur and pasting a link to it here.
Life in the Federal Potemkin village is soooo sweet these days.
USDOL: "High Growth Industry Profile - Transportation" More like USLOL.
http://www.doleta.gov/BRG/Indprof/Transportation_profile.cfm
Hummm... lottsa trucks just sitting by the rest areas... hummm... Were these trucks perhaps loaded with stuff?
Just specklelatin here...
If the trucks were loaded, it's possibly a bit of inventory channel stuffing going on... maybe with a twist.
If the seller (mfg) books a "sale" when he ships (instead of when the "buyer" takes delivery/pays), then the "seller/mfg" gets to book revenue. If the loaded trucks rolled out of the factories at the end of September, then look for 3rd qtr "sales" to go up. If sales go up, the stock price of the mfg go up.
Then after the "sales" are booked, they probably roll the trucks back to the factory as "returns" and take the sales off the books. Then towards the end of Dec - same song, different quarter.
It's could be kinda like a pump & dump move... kinda. Actually the "sales" might be part of a stock pump and dump maneuver to get the stock price of the mfg up - the seller dumps and sells short, and then when the trucks roll back in still loaded makes money on the same load of stuff both coming and going.
If it works and the mfg owns the trucks, they might just leave them loaded until the end of the next qtr. ;-D
But wait!! Hasn't all of this been changed and now heading up towards the rainbow, due to the efforts of the politically correct and Marxist indoctrinated US college grads? Aren't they flooding out there in a tear into critical industry positions like the pumped up heroes of tag team wrestling? Fixed, right?
I see doom for those corporate mother fucking weed sellers. Mex cartels have already felt the pain.
Hey Wolf, drove across Houston, TX this morning, several places there were v-e-r-y l-o-n-g lines of trucks crawling along to exit at freeway offramps, and also parked alongside roads leading to truck stops. I didn't see a pattern to the cargo (very few of them were container cargo). The only times I've seen this is when the drivers are waiting out EXTREMELY bad weather ... and the weather is great. Whiskey Tango Foxtrot?
For most of this week, the rail yard in Katy TX at the KKaty Ft Bend road had had empty rail cars parked on the five sidings. Most of these cars transport gravel and cement for concrete plants.
Tango Uniform
People are no longer buying the container loads of rubber dogshit from China like they used to.
But what's slowing down the sales of Monsanto enhanced potato chips, the only chips fried in crude oil?
yep, looks like maverick might be out of a job too.
Good luck with that, because I'm not buying shit for Christmas this year. Suck the big one, government, the Fed, and Wall street!
I'm not buying shit for Christmas this year.
us neither! or too! or something like that...
like bartleby the scrivener, we prefer not...
it's been a few years since we "did" christmas...
it's very liberating to not participate...
i was personally offended when bush told us to "go shopping" after 911.
All my life I sort of gauged the semi traffic on I-70 and I-75 to get a feel for how the economy was doing. Here in the rust belt, a dearth of trucks on those highways meant you might be laid off soon.
This is very bad news.
I do the same on I-85 in N.C. It had been a very reliable indicator pre-2008.
That's my neck of the woods, and truck traffic seems relatively heavy, especially compared with '09.
I work in this industry consulting from time to time, spent many years in it in a prior life and yes business is down. Oh but don't worry the geeks are in here as well creating crap apps that will save the day with automating the brokers and pricing into the phone. It won't work as there's way too many items that can't be automated here. I've been following it and this is another failure set to come. Sure some space will be filled here and there, but it's not an overall answer, just a bunch of geeks carving out money again and making the price rise for consumers to ship from point a to point b.
If you've driven around the west, you have likely seen rail spurs full of rolling stock, mostly container flats. The trucking sector is in bad trouble with their own ineptness and reduced cargo. But Uncle Warren is still making money with his trains so it's all cool......
"But Uncle Warren is still making money with his trains"
At least as long as he can delay the pipeline construction.
I should go long on Bounty, the quicker picker upper.