This month, BNSF Logistics' Director of Market Research and Director, Multi-Modal Services observe over the road and intermodal market conditions.
RETAIL SALES ARE ON THE RISE AS HOLIDAY SEASON NEARS
October retail sales is up 1.6% - the largest rise in the past three months – with clothing stores, department stores, sporting goods, auto dealers experiencing the highest areas of increase. Purchasing Manager’s Index (PMI) for October is 53.2, a slight expansion over last month, and consumer sentiment increased to 80.4.
Manufacturing production, which measures output of the manufacturing sector and accounts for approximately 80% of total production, is down 6.9%. U.S. unemployment for this month improved and beat estimates at 7.9%. Durable goods orders – excluding transportation – is up 0.4%, and orders of non-defense capital goods –excluding aircraft – is at 2.79.
CAPACITY AND SPOT RATES CONTINUE UPWARD TREND, TRUCK LOADING IMPROVING YEAR-OVER-YEAR
Logistics Management Index (LMI) is 70.5, increasing 4.5 from last month. The LMI is made up of inventory levels, inventory cost, warehouse capacity, utilization and prices, and transportation capacity utilization and prices. The September reading indicates growth is increasing for inventory levels and cost, warehouse utilization and prices, and transportation utilization and prices. Warehousing capacity and transportation capacity are contracting; rates are going up while capacity is going down.
FTR Market Demand Index recorded record level load-to-van ratios while total truck loadings outlook improved to -5.6% for the year. Truckload rate outlook for spot rates is now flat year-over-year, and contract rates improved to -2.8%.
Tender rejections for contracted loads across the U.S. sit at approximately 25% as of mid-October, Tender volumes are at 15,150, coming off its peak from Labor Day, however volumes are expected to remain elevated throughout the rest of the year.
Both DAT load-to-truck ratio and spot rates are up month-over-month, with van +2.6%, reefer +3.9% flatbed +27.7% for load-to-truck ratio, and van: +6.9%, reefer +5.4%, flatbed +5.2% for spot rates. Ocean TEU Prices elevated to current prices since mid-September as imports are high to replace depleted inventories.
INTERMODAL AS AN OPTION TO DIVERSIFY TRANSPORTATION PORTFOLIO
Mirroring the over the road market, intermodal rail volume and rates are increasing. Lanes out of the east coast, out of the southeast to the west coast, and out of the east coast to the midwest or west coast are primary lanes and capacity has been the most secure; lanes out of the west coast have come at a premium. As over the road capacity continues to tighten, intermodal can be a strategic part of any shipper’s transportation procurement strategy.