PHOTO – PAUL SULLIVAN FLICKR – CREATIVE COMMONS
2016 has been a tough year for the logistics industry. Severe overcapacity in the ocean carrier sector has resulted in bankruptcies and fire sales. Similar overcapacity, burdensome federal regulations, and significantly high driver turnover has left the trucking industry beaten and battered. Plus railroads have lost coal and oil business – their two biggest earners.
To add to the general air of depression we’ve had a particularly brutal and divisive political campaign, and the political rhetoric has left consumers insecure and corporations uncertain about the economic future.
However I’m seeing the seeds of change, enough to make me confident 2017 will be a great year for the logistics industry – and here are 8 reasons why:
1: The US Economy Grew 3.2% in Q3
This is the fastest pace the US economy has grown in two years. The Commerce Department had initially estimated GDP at 2.9%. The major contributors to this growth surge are consumer spending, which accounts for 70% of economic activity, and which grew a rate of 2.8% in the third quarter, up from the 2.1% first estimated. Plus export sales which grew at 10.1%.
2: Corporate Profits Continue to Grow
As reported by the Wall Street Journal after tax earnings across US corporations rose 5.2% in the third quarter from a year earlier according to the Commerce Department. That was the first annual increase since late 2014 and the strongest year-over-year growth since fourth quarter of 2012.
“We had been anticipating a turnaround for profits as nominal growth picked up; but the firming, at least so far, looks more rapid and stronger than we had expected,” J.P. Morgan Chase economist Daniel Silver said.
3: Consumer Sentiment Rose Sharply in November
The University of Michigan consumer survey reports a consumer sentiment index of 93.8% in November. This is an increase of 7.6% over the previous months and a 2.7% year on year change. The Survey of Consumers chief economist, Richard Curtin, states that the initial reaction of consumers to Trumps victory was to express greater optimism about their personal finances as well as improved prospects for the national economy.
4: November Payroll Increase Beats Expectations
The ADP National Employment Report, published in conjunction with forecasting firm Moody’s Analytics, showed that private payrolls across the nation rose by 216,000 exceeding economists expectations of 170,000.
5: Consumer Spending and Incomes Are Rising
According to the US Department of Commerce incomes increased 0.6% in October, the best monthly gain since April, and after a 0.4% gain in September. Personal expenditure rose 0.3% in October from the prior 0.7% increase in September, the second biggest monthly gain in two years.
6: Online Holiday Shopping Significantly Increases
The Wall Street Journal reports that:
“E-commerce accounted for 25% of consumer spending on Black Friday and the two days prior, up from 18% last year and nearly double the figure for the same period four years ago, according to First Data Corp., which analyzed point-of-sale data at nearly one million merchants.”
But more importantly:
“The surging levels of web orders will test retailers’ fulfillment and logistics operations and put added pressure on shipping companies like United Parcel Service Inc. and FedExCorp., which will have to deliver millions of packages to consumers’ homes in the weeks leading up to the year-end holidays.”
7: Coal and Grain Shipments Are Boosting Railroad Operators
It’s not only the parcel carriers who are happy but the railroad operator CSX is seeing improving demand trends for the current quarter – particularly coal. In addition shipments of grain and soybeans are up 6.5% and set the record of over 26,000 carloads a week during the peak of the harvest in October.
8: The Cass Shipment Index Is up on a Year on Year Basis for the First Time in 20 Months
To quote from the October Cass Report
“Although it is far too early to make a‘change in trend’ call, data is beginning to suggest that the consumer is finally starting to spend a little and that the industrial economy’s rate of deceleration has eased. Simply put, the winter of the overall freight recession we have seen for over a year and a half in the U.S. may not be over, but it is showing signs of thawing.”
So in summary the economy is improving, corporate profits are up, consumers are more confident, more people are being hired, consumer incomes and spending are up, parcel carriers and railroad operators are seeing increased business, and according to the Cass report the freight recession is showing signs of thawing.
Times are changing for the better my fellow logistics professionals!
If you’re interested in learning how shipping by rail might better meet your freight transportation needs, or need warehousing to bring your goods closer to your customers, call New Mexico Transloading at 505 – 908 – 1911. We’d be delighted to have a conversation with you.