Investment analysts see indicators of a recovery in the manufacturing sector, particularly in the Midwest, but current trends in truckload transportation don't seem to be supporting those growth projections for the final two months of 2013. The Chicago Purchasing Managers Index for October, published today, outperformed expectations as it achieved the highest growth level since March 2011. [Note: the National PMI also rose in October, as reported on November 1st by the Institute for Supply Management.]
I hate to be a Grinch, but I still expect December to be a soft month in the TL segment, with falling rates across all equipment types. Despite October's rosy outlook, I see certain negative indicators in the economy, going forward. Economists are now predicting that GDP growth will be 1.5% instead of 2.0% in the fourth quarter, compared to Q4 2012. Many analysts had hoped that consumer demand would boost GDP at year end, but that is looking less likely now.
For example, housing is down sharply, and that was reflected in September's declining flatbed rates. Spot market ("broker buy") rates for flatbeds dropped by 7¢ per mile as a national average, and contract rates lost 3¢ per mile. For vans, the seasonal freight surge began late in September and continued through much of October, but it appeared to taper off before the end of the month.
Prompted by these observations, I looked for further evidence in van rates and reefer rates from major hubs and ports that are big sources of seasonal freight. In addition to my usual check of 80 top van lanes and 76 reefer lanes, I compared last week's rates with the 15-day rolling averages in several markets that were especially active in October. In nearly every case, spot market rates are either stable or declining.
For a more detailed view, I took a close look at Rock Island, IL, one of the most active markets on the Upper Mississippi.
VAN - Rates Rise at Selected Ports and "Last Mile" Hubs
Lane rates are trending down from Rock Island to Dallas and Atlanta, as non-perishable items for Thanksgiving and Christmas have already been positioned in those major hubs. The timing may be a bit early compared to typical seasonal moves. On the other hand, rates are rising from Rock Island to Columbus and Philadelphia, where freight is staged for the "last mile" to major metro areas in the Eastern U.S. and Canada.
Rock Island one of the Quad Cities (the others are Moline, IL, Davenport, IA and Bettendorf, IA) which together comprise a large population center and freight hub, situated between Des Moines and Chicago, and midway on the north-south axis between Minneapolis and St. Louis. As a food production center, this area drives holiday food traffic but it is less active in general retail merchandise shipments.
For insight into retail trends, we look at the port cities as well as key nodes in the supply chain, such as Atlanta, Dallas and Memphis. Outbound van rates are rising from the port cities of L.A. and Roanoke, but last week's rates fell below the 60-day rolling average out of Miami, Houston and Savannah. In Memphis is a key retail freight market because of its role in LTL and package shipments, rates lost 2.5% last week.
REEFER - October Rates Outpace Last Year's, Due to Robust Crops
Rates rose last week for reefers on major outbound lanes from Joliet, IL and Fayetteville, AR, likely indicating increased shipments of turkeys and other fresh and frozen foods for Thanksgiving.
At the same time, trends were mixed in larger reefer markets such as Atlanta and Ontario, CA, where outbound lanes peaked earlier in the season. Fruit and vegetable harvests were robust this year, but late-season crops such as cabbages, squash, carrots and potatoes do not command the same urgency or rates as the fruit and highly perishable vegetables that move earlier in the season.