Jason Miller’s Post

Q1 has come and gone, and the dry van truckload market did not turn as more optimistic predictions had predicted (https://lnkd.in/gbWQFQB6). Q2 hasn’t looked any better? Why? The answer: demand for truck transportation remains weak. This is in spite of strong year-over-year gains in imports and robust retail trade sales. How can this be the case? Simple: domestic manufacturing still produces the bulk of for-hire trucking demand, and freight-weighted domestic manufacturing remains in a deep slump. One chart below showing this using the seasonally adjusted for-hire trucking ton-mile index that I coauthor. Thoughts: •February’s seasonally adjusted ton-mile reading jumped 1.5% from January’s low reading (which occurred due to the polar vortex) but remains down roughly 2% from this time in 2023 (and remember, we had been in a freight recession for roughly 5 months as of February 2023 [September 2022 saw the first major drop in demand]). •Relative to the seasonally adjusted peak from March 2022, demand for truck transportation has dropped 4%. That may not seem like much, but employment has fallen just 0.3% over this same period (see https://lnkd.in/gdYDGD4j). •For those wondering why demand isn’t stronger given those strong import gains, remember what I’ve been preaching for year(s): imports don’t represent that much freight relative to what we manufacture domestically. Consequently, all the stock analysts focusing on import-centric retail trade are missing the boat (pun intended). Implication: for the dry van truckload market to turn from bear to bull, we either need a much larger loss of capacity (unlikely to happen quickly) or for demand to improve substantially, which will require a sharp rebound in domestic manufacturing activity (also unlikely to happen quickly). As such, I would pencil in “blah” conditions for the immediate future. #supplychain #supplychainmanagement #shipsandshipping #freight #trucking  

One sector of manufacturing that has remained strong is production of motor vehicles (https://lnkd.in/gN69F6CB). This raises the question: is this likely to continue through 2024? Data on downstream demand points to this being an affirmative. Two charts below. Thoughts: •Top chart shows unit not seasonally adjusted sales of domestic light trucks (which includes SUVs) made in the USA. Sales for Q1 2024 are 4.0% above Q1 2023, 10.8% above Q1 2019, and 12.8% above Q1 2018. There are no signs yet of sales dropping substantially (a great sign for vehicle makers). •Bottom chart shows inflation adjusted exports of autos and light trucks. 2023 was a strong year, and while 2024 is off to a slow start, this may be due in part to seasonality. Implication: continued strong sales of light trucks and SUVs, both to domestic buyers as well as exports, remain strong thus far in 2024. Motor vehicle production is a key sector generating demand for truck transportation, and for there to be any chance of the trucking sector breaking out of the current freight recession, we will need to see this sector’s output remain robust through 2024. #supplychain #supplychainmanagement #shipsandshipping #manufacturing #freight #trucking

Much has been written about a ‘shift of containerized imports back to the West Coast’ over the past few months. However, Census Bureau’s detailed data on metric tonnage of containerized waterborne imports through each import district of the US suggest this is more a regression to the long-term trendline, and not a true weakening of containerized imports through the East and Gulf Coast. Two charts below from USA Trade Online data (operated by the Census Bureau). Thoughts: •Top chart shows metric tonnage of containerized waterborne imports from Asia that entered the USA via East or Gulf Coast ports. While January 2023 was down slightly from 2023 and substantially from 2022, it was still 18% above January 2019 levels. Moreover, February 2024 set a record, surpassing even 2022 and coming in at staggering 41% above February 2019 levels. •Bottom chart shows the percentage of Asian containerized imports that entered the USA via West Coast ports for January and February (combined) of each year back to 2003. While 2024’s figure of 48% is 3 percentage points above 2023’s record low of 45%, back in 2019 this figure was 52%. •The bottom chart is why I use the language ‘regression to the long-term trendline’. If you fit a trendline through these data, that is precisely what we see. Implication: while some containerized imports have indeed shifted back to the West Coast, I don’t see this changing the long-term trendline that we are observing. Major importers have made large investments in transloading facilities at East and Gulf Coast ports, and they fully intend on leveraging those facilities moving forward. #shipsandshipping #supplychain #supplychainmanagement #economics #freight #trucking

Unless something dramatic changes with DAT’s weekly spot market data update tomorrow, it’s increasingly looking like April will not be the month where the dry van spot market turns. Two charts below from their data. Thoughts: •Top plot shows dry van spot market truckload rates (including fuel) as well as broker buy contract rates (including fuel). April’s reading currently is $2.01, same as March. Prices have come down substantially since January. In contrast, broker buy contract rates remain quite steady. Certainly, no signs yet of dry van spot rates turning. •Bottom chart shows the dry van spot market cycle indicator, calculated as broker buy contract rates less dry van spot rates divided by the average of the two rates. 10% has tended to be the threshold where the dry van truckload market turns. April 2024 is currently sitting at 20%, which is solidly in bear market territory. •For those wonder why the dry van market hasn’t recovered, four words: weak domestic manufacturing output. While containerized imports get a lot of attention, they represent a small percentage of dry van truckload freight. As such, dry van carriers shouldn’t get too excited that containerized imports are much stronger so far this year than last year. Implication: continued weakness in the dry van truckload spot market suggests that a Q2 market turn is looking increasingly less likely. If the market doesn’t start turning soon, it will be time to write off 2024 and wait for spring 2025 as the soonest the market may flip. #supplychain #supplychainmanagement #freight #trucking #truckload #transportation #logistics

For anyone who is interested in spending a few days in East Lansing at the Michigan State University - Eli Broad College of Business Henry Center for Executive Education and wants the opportunity to learn from some of the faculty at MSU's top-ranked supply chain management program, I'd encourage y'all to consider our Supply Chain Logistics Management Executive Seminar that runs May 5 through May 10. I'll be teaching a 2.25 hour seminar called Market Data Insights that covers how to leverage various publicly available data sources to make better decisions. The best part: you guide the session by telling me what interests you, and we will go from there. Some things I've discussed in the past: •How to use the Bureau of Economic Analysis' input-output accounts to break down the cost structure in supplier industries. •How to anticipate future pricing trends across various transportation modes. •Identifying relevant data series to understand demand dynamics (e.g., industrial production indexes, housing, etc.). Below is the link for more details. Hope to see a few of you there! https://lnkd.in/gquwnFUj

I don’t know about y’all, but I’m particularly fond of good dark chocolate as well as coffee. And on that note, I have some depressing news to share if you are a consumer: commodity prices in this sector have taken off. Two charts below, using free data from the World Bank through March 2024 (https://lnkd.in/esU6SeN). Thoughts: •The top chart shows the $/kilogram for Cocoa, which per the World Bank, represents, “International Cocoa Organization daily price, average of the first three positions on the terminal markets of New York and London, nearest three future trading months.” Very dry weather in West Africa is to blame (https://lnkd.in/gbXefHT9), with March 2024 prices being 160% higher than March 2023. •Bottom chart shows the $/kilogram for Robusta Coffee, which is primarily used in espresso and instant coffee (as well as various coffee blends, such as Nespresso Vertuo pods). Per the World bank, these data represent, “International Coffee Organization indicator price, Robustas, average New York and Le Havre/Marseilles markets, ex-dock.” Weather issues in Vietnam and Indonesia are to blame (https://lnkd.in/gdyMrYK7).   •While ‘commercials’ (e.g., large chocolate and coffee manufacturers) will have hedged against price increases, I would anticipate that consumers will ultimately experience some price increases because of these commodity surges.   Implication: while cocoa and robusta coffee represent, together, just 2.3% of the World Bank’s total commodity weight, chocolate and coffee manufacturers will be closely watching their price movements to ascertain whether they need to pass on higher input costs to wholesalers and retailers who, in turn, will pass along higher costs to consumers. While coffee prices have been relatively steady since late 2022 (https://lnkd.in/gnJBVgjw), I wouldn’t be surprised if expresso drinkers don’t find those little shots of caffeinated jet fuel become more expensive over the coming months.   #supplychain #supplychainmanagement #markets #economics #shipsandshipping

As much has been written about the strong year-over-year increase in containerized imports for the first few months of 2024 relative to 2023, I thought it would be interesting to examine what types of products have seen the greatest increase versus decrease for January and February 2024 versus January and February 2023 based on the weight of those containerized imports. The table below shows this, with the top 5 increase categories on top and the bottom five on the, well, bottom. I used the Census Bureau’s mapping of HS codes to NAICS codes to make the categories easier to understand. Thoughts: •The biggest gainers are semiconductors, plastic products, household furniture, motor vehicle parts, and household appliances. The biggest factor I see at work here is strengthening single-family housing generating demand for things like furniture, appliances, and likely various other construction materials that qualify as plastic products. This also likely reflects furniture wholesalers’ inventories to sales ratios being in a much better position today compared to the same period in 2023 (https://lnkd.in/g-r8nMhj). •The biggest losers are converted paper products, electrical equipment and components, and cement and concrete products. It’s harder to make a precise reading here other than (i) we know some nonresidential construction activity is slowing and (ii) we have seen domestic converted paper products move into deflation, whereas in early 2023, prices were strongly inflationary (https://lnkd.in/dGbpJYCe). Therefore, there were likely fewer arbitrage opportunities by buying from overseas (especially China). Implication: For January and February 2024, containerized waterborne imports were up 5.5% by weight from the same months in 2023. However, this increase underlies substantial shifts in the specific types of products being imported. I continue to believe peeking under the hood of the trade data allows for opportunities for better managerial decision making for logistics providers active in this space. #supplychain #supplychainmanagement #shipsandshipping #freight #trucking

Back in 2023, there was much consternation about student loan payments resuming later in the year, with predictions that it would result in a substantial decline in consumer spending (e.g., https://lnkd.in/dyu4u9MQ). However, this has turned out not to be the case. One likely reason: the resumption of student loan payments had, on an economy-level basis, minimal impact on debt service payments relative to disposable income. On chart below. Thoughts: •This chart shows household debt service payments as a percent of disposable personal income (call code TDSP in the FRED database). As can be seen, Q4 2023’s reading was practically unchanged from Q3 2023. As such, despite many concerns, it doesn’t appear that the resumption of student loan payments caused a substantial shift in debt payments (again, at an economy-wide level). •It continues to be worth emphasizing that household debt service payments remain historically low; they are certainly below the highs we saw just before the Global Financial Crisis. This suggests that concerns about people living beyond their means are likely overstated at an economy-wide level. •For anyone interested in understanding these data in more detail, the Federal Reserve Board has a thorough summary available here: https://lnkd.in/dHQ8a7ad. Implication: the resumption of student loan repayments in the 4th quarter of 2023 didn’t result in a surge of household debt service payments relative to disposable income. This helps explain why consumer spending defied expectations this holiday season. #supplychain #supplychainmanagement #shipsandshipping #freight #ecommerce #trucking 

Despite many headlines about layoffs, nationally representative data continues to show a robust labor market with very few initial unemployment claims as well as unemployment (even when measured by the most encompassing version of that statistic). Two charts below. Thoughts: •Top chart shows not seasonally adjusted initial unemployment claims (call code ICNSA in the FRED database). 2024’s weekly data shown as the thicker blue line. As can be seen, 2024’s initial claims are right in line with what we saw in 2022, 2023, and the average for 2017-2019. They are also well below average claims for the average of 2014 – 2016. As such, nothing exciting to report here. •Bottom chart shows what’s called the U-6 unemployment rate (call code U6RATE in the FRED database). This measures Total Unemployed, Plus All Persons Marginally Attached to the Labor Force, Plus Total Employed Part Time for Economic Reasons, as a Percent of the Civilian Labor Force Plus All Persons Marginally Attached to the Labor Force. U6 for March was 7.3%, which while hire than the 6.5% readings we saw in late 2022, remains historically low (e.g., it was 7.8% in mid-2018). •And to preempt anyone, no, these data aren’t being doctored/cooked/fudged by the Bureau of Labor Statistics. To the skeptics, put away your tin foil hats 😉 Implication: various sources of data concerning unemployment continue to show a robust labor market. This will give the FOMC more room to delay interest rate cuts given concerns that inflation may not be approaching the 2% target as quickly as desired. I continue to believe June is the absolute earliest we could see an interest rate decrease. #supplychain #supplychainmanagement #economics #freight

Yesterday was Admitted Students Say at Michigan State University, where I had the opportunity to represent the Department of Supply Chain Management in the Michigan State University - Eli Broad College of Business (presentation below for the more fun 'trivia' version [don't cheat, download the presentation and immediately flip into slideshow mode to test yourself]). As you can imagine, one question that I received is "what exactly is supply chain management." •My answer to that question is that there isn't a definitive definition of what supply chain management is. The term is used differently across firms, professional societies, and academics. •My personal view is increasingly that, for practical purposes, supply chain management is a catch-all term for procurement/sourcing, operations, and logistics. In other words, SCM plays the same role that a term like "Human Resources" plays for a myriad of personnel tasks, or "Accounting" plays for various activities. My question for y'all: what does supply chain management mean to you or your organization? Is there a consensus definition that emerges in practice, or is there still a way to go until we converge on a common definition? #supplychain #supplychainmanagement #logistics #transportation