The shippers (like UPS and FedEx) are usually pretty decent coincident indicators of economic activity.
I forget who it was, either a central banker or some at the top who use to say: When I want to know how the economy is doing I just call Joe CEO over at UPS and ask him how the volume was.
When I go to my local UPS store, it I can hear the crickets chirping. Feel sorry for the people about to lose their jobs (inevitably). What will they do next?
Just for the record inside the industry the shippers are the folks like us sending things. These guys are, in their own words and minds, the carriers. A minor point and yes I was involved in the industry.
UPS and FDX are good indicators but even better are the trucking firms who are even more closely tied into the ebb and flow. Yellow has been seeing weakening demand for almost a year now.
Andrew - the freight data is highly consistent. Commodity shipments are up. Intermodal is down.
By tonnage truck freight is now increasing, and so is rail. But if you segment the traffic, the parts related to retail-type shipments are down.
That really should not be a surprise. As consumers experience generally tightened credit and higher prices for necessities, they have less money to spend on other items.
Both Federal Unemployment Tax and freight data seem to show that the production part of the economy is picking up as the consumer part of the economy is slowing. Both are moving in tandem in a reversal of a prior two-year declining trend, which is why I am so insistent that this trend is real. I follow NC economic data closely because it is a good indicator of a number of trends, and import/export is good and so is base production. The weaker dollar is kicking in.
I still say we are in a recession. However it is nice to see that the underlying rebalancing is beginning. We have to begin to produce more.
MOM thanks for the insight. However, "rebalancing" implies that domestic manufacturing increases will offset consumer decreases. Given that consumer is so much larger a part of the economy, and U.S. consumer demand is to a certain extent recycled into foreign demand for U.S. goods, I am skeptical that it will balance out.
Has UPS raised its prices? I've been wondering how increased shipping costs (caused by increased fuel costs) would impact e-commerce. Amazon, certainly, but also eBay.
At some point, increased shipping costs eat into every advantage that e-commerce has over brick-and-mortar retail, with the possible exception of selection and availability (for those of us living in Podunk).
"At some point, increased shipping costs eat into every advantage that e-commerce has over brick-and-mortar retail"
Hard to find that balance... brick and mortar guys have to pay trucking, too... plus the customer has to drive to the store. That second part could be a big one.
Re-balancing may be nice, but gonna be lots of pain and dislocation getting there. Just about whole industries, think financial and housing have to be disassembled and redone to have a much more minor role. Then investment in a time of capital crisis must be redirected toward an assumed good thing, in spite of political pressure to keep that capital, public or private from being used to save political connected losers.
Finally, there must be a sufficient decoupling, that the crash in demand from the US, must not create a crash in demand from other countries. Lets not forget that the UE rate in China is rocketing up at the same time China wants to produce the same things that our manufacture revival wants to produce.
We gotta get out of the asset related debt support for the economy and have decent wages for the consumers to support the economy. But there is no warranty that manufacturing is the way to go.
Eric and Vader, you are right. It will take a while. Production jobs do tend to spin off servicing jobs, but the size of the production sector has dropped so much in proportion to services that it will take a long time to produce an overall positive effect.
SpendingPulse said retail sales for Feb dropped 1.1%. That's the reality. Right now gas prices are overwhelming the consumers.
MOM said: "SpendingPulse said retail sales for Feb dropped 1.1%. That's the reality. Right now gas prices are overwhelming the consumers."
Obviously not, if they're still buying the gas. When they stop buying so much gas and driving up the price with their buying, that will be the point at which they are "overwhelmed."
Just having to prioritize spending (gasoline or new clothes, for example) instead of simply getting everything you want at the price you want is neither an abnormal condition nor a recessionary one.
It's a sad day when Jas Jain essentially gets it right, that Americans are so spoiled that having to choose one consumer product over another instead of having it all is "hard times.":)
My best positive guess is a for a few medium to large size foreign ops, like BMW in South Carolina, ThyssenKrupp in Alabama for example and lots of small outfits. I remember one small outfit less than 10 people that produced milk churns for Africa.
However, IMHO, non will support the level of consumption of the last 20 years. Non will simply throw off that much in wages in total. Still it should produce a comfortable middle class life style.
I expect to see the international number fall off as the overseas supply chain adjusts to lower North American demand. I would expect this effect to lag the slow down at home.
Question is can they pass on the increased fuel costs, et al....fast enough to maintain profitability?
USPS is kicking prices up again on May 12th. Beginning this year they have a streamlined procedure to adjust prices with a minimum time-lag. Competitive products (Priority Mail, Express Mail, etc) have yet to be announced (and we're down to 60 days until they change). First class goes up by 1-cent. USPS has something like 5-billion of the price-increase resistant First Class stamps stockpiled to meet the demand just before the increase takes effect. Hell of a way to goose business in the off-season (6-months pre/post the holiday season peak).
At some point, increased shipping costs eat into every advantage that e-commerce has over brick-and-mortar retail, with the possible exception of selection and availability (for those of us living in Podunk).
That depends on how far you have to drive to get to the brick & mortar retailer (gas prices in your SUV) and how difficult it is to locate the item you desire.
If you are searching for something that was retired (from the manufacturer's production) 2-5-10 years ago, then on-line trumps all other methods.
WalMart has (or did have recently) an interesting method called "Site-To-Store". Basically, they had stuff in certain stores that moved ever so slowly, and wasn't well available nationwide. I could order something online, then pick it up at my local store 7-10 days later. I did this last August. The various labels on the package told me that it shipped from a WM warehouse in upstate NY to my local store (in Fla). I presume that WM gets a national pricing plan from UPS (who carried the package). As to total cost, it beat any other retailer w/shipping that I could find on the net (and I picked it up during a normal visit to the WM store).
Sebastian When they stop buying so much gas and driving up the price with their buying, that will be the point at which they are "overwhelmed."
Gas purchases ARE declining. Take a look at the EIA figures. These are volume figures. Gas supplied in December was the lowest in over 20 years and was the fifth month consumption dropped.
I have a hunch that Jan's figures will be slightly up and that Feb figures will be further down. They're overwhelmed!
Aggregate Nov/Dec gas consumption in 2007 was 10% below 2000 figures, 4.7% below 2006 figures, and 6.2% below 2005 figures.
Grocery stores are hurting too. If you look at revenue figures, sales appear to be going up. If you look at volume figures, sales on a lot of items are going DOWN, and profits are hurting too. See Kroger's results.
When you have so much pressure on the basics, the rest of it is really in peril. Carbonated soft drink sales fell 0.2% in 2005, 0.6% in 2006, and 2.3% in 2007. Total volume fell below 10 billion cases for the first time since 2000. According to Beverage Digest, it is not just soda that's declining - the total LRB market appears to be dropping. The pricier stuff, like fruit juices, dropped far more. In some markets bottled water is dropping. Even during 2001 and 2002, these volumes rose.
Consumer prices are big factor right now. Companies have to raise them, but consumers are price sensitive.
MOM said: When you have so much pressure on the basics, the rest of it is really in peril. Carbonated soft drink sales fell 0.2% in 2005, 0.6% in 2006, and 2.3% in 2007.
That's scary. People are nervous if they're cutting, as a herd, their soft drink purchases.
But I wouldn't base everything on gasoline sales. Why? I'm starting to, gasp, carpool. So are coworkers. Over twenty of my employees have traded SUV's for used '4-bangers.' (Ok, almost all kept the SUV for the weekend...)
Forbes.com File Not Found
I have hacked this article up a bit but the points are interesting and may affect international shipping.
"China's trade surplus in February totaled US$8.6 billion (euro5.6 billion), down from a US$23.7 billion in February 2007, according to customs agency data." ...
"China's imports in February surged 35 percent to US$78.8 billion (euro51.4 billion) from the year-earlier period, according to the customs agency.
Exports grew by 6.5 percent to US$87.4 billion (euro57 billion) - a much slower rate than January's 26 percent. That could spur worries that slowing U.S. demand will hurt Chinese exporters and could wipe out thousands of jobs."
"February's monthly trade gap with the United States, China's No. 2 trading partner, shrank 23 percent to US$9.4 billion (euro6.1 billion) compared with the same month in 2007, the customs agency said.
China's exports to the United States fell 5 percent in February to US$16.4 billion (euro10.7 billion), while imports of American goods jumped 33 percent to US$6.1 billion (euro4 billion).
The surplus with the 27-nation European Union, China's biggest trading partner, narrowed by 15 percent to US$10 billion (euro6.5 billion), data showed."
Thanks for the updates MOM. You are exceeding good at this from my layman's perspective. I keep meaning to study your techniques and sources (and CR's) to get a tutorial on economic analysis and what sources to use. Sigh Why is it that all the worthwhile financial toolkits seem to come "some assembly required by user" and "results may vary and will improve with user experience".
Neil, I seem to recall a post on Krugman's blog (or was it here) were a guy that worked at a pizza shop was saying that 5 years ago when he started no one ordered a medium, recently they have become over half their orders. The owner of my local Coffee shop has been saying the same thing - sales are down and people are ordering cheaper items.
is the decline in soft drinks really attributable to cutting back? i seem to recall hearing that the massive growth for pepsi/coke in the last few years have been the non-carbonated drink markets
funny coupon i just got in my email from a local bbq joint, they're advertising deducting from your bill the price of a gallon of gasoline with a receipt:
"In response to the survey we sent last month, many of you mentioned that rising gas prices are eating away at your barbecue budget. We hope this offer provides some relief!"
MOM said: "Gas purchases ARE declining. Take a look at the EIA figures. These are volume figures. Gas supplied in December was the lowest in over 20 years and was the fifth month consumption dropped."
But they're not cutting back far enough to bring down prices.
In looking at the EIA link you posted (thank-you), gasoline consumption was substantially higher in 2001 and 2002 than it is now. What sense does that make if gasoline consumption was higher during a full-out, no-doubt-about-it recession than it is now, if gasoline consumption was as significant a consumer tell-tale as you suggest? Why couldn't it simply be that consumers simply started buying higher-mileage vehicles?
UPS relies on hundreds of thousands of part time employees, esp during Christmas, etc. Lots of friends of mine would supplement income by taking a couple shifts at local UPS centers (usually 4 hours a night, 4 days a week). I would suspect that a lot of these part time workers are getting laid off, or having hours cut back. Does anyone know if these types of workers are eligible for unemployment compensation?
Feeurst!
Question is can they pass on the increased fuel costs, et al....fast enough to maintain profitability?
This recent quick run up in fuel prices has to pinch them hard.
MOM, you have any updates on the ports and trucking/transportation data?
Don't forget intercity truck tonnage especially the LTL portion.
Paperboard orders and shipments also a good indicator.
The shippers (like UPS and FedEx) are usually pretty decent coincident indicators of economic activity.
I forget who it was, either a central banker or some at the top who use to say: When I want to know how the economy is doing I just call Joe CEO over at UPS and ask him how the volume was.
Nice pick up CR...
Johnson: don't use UPS! Send it via email as a PDF and get a digital signature instead!
When I go to my local UPS store, it I can hear the crickets chirping. Feel sorry for the people about to lose their jobs (inevitably). What will they do next?
This recent quick run up in fuel prices has to pinch them hard.
Kp | 03.12.08 - 12:19 pm | #
Fuel surcharge
Chris
Just for the record inside the industry the shippers are the folks like us sending things. These guys are, in their own words and minds, the carriers. A minor point and yes I was involved in the industry.
UPS and FDX are good indicators but even better are the trucking firms who are even more closely tied into the ebb and flow. Yellow has been seeing weakening demand for almost a year now.
Meanwhile, the dollar quietly continues its slide.
Andrew - the freight data is highly consistent. Commodity shipments are up. Intermodal is down.
By tonnage truck freight is now increasing, and so is rail. But if you segment the traffic, the parts related to retail-type shipments are down.
That really should not be a surprise. As consumers experience generally tightened credit and higher prices for necessities, they have less money to spend on other items.
Both Federal Unemployment Tax and freight data seem to show that the production part of the economy is picking up as the consumer part of the economy is slowing. Both are moving in tandem in a reversal of a prior two-year declining trend, which is why I am so insistent that this trend is real. I follow NC economic data closely because it is a good indicator of a number of trends, and import/export is good and so is base production. The weaker dollar is kicking in.
I still say we are in a recession. However it is nice to see that the underlying rebalancing is beginning. We have to begin to produce more.
MOM thanks for the insight. However, "rebalancing" implies that domestic manufacturing increases will offset consumer decreases. Given that consumer is so much larger a part of the economy, and U.S. consumer demand is to a certain extent recycled into foreign demand for U.S. goods, I am skeptical that it will balance out.
Has UPS raised its prices? I've been wondering how increased shipping costs (caused by increased fuel costs) would impact e-commerce. Amazon, certainly, but also eBay.
At some point, increased shipping costs eat into every advantage that e-commerce has over brick-and-mortar retail, with the possible exception of selection and availability (for those of us living in Podunk).
"At some point, increased shipping costs eat into every advantage that e-commerce has over brick-and-mortar retail"
Hard to find that balance... brick and mortar guys have to pay trucking, too... plus the customer has to drive to the store. That second part could be a big one.
Re-balancing may be nice, but gonna be lots of pain and dislocation getting there. Just about whole industries, think financial and housing have to be disassembled and redone to have a much more minor role. Then investment in a time of capital crisis must be redirected toward an assumed good thing, in spite of political pressure to keep that capital, public or private from being used to save political connected losers.
Finally, there must be a sufficient decoupling, that the crash in demand from the US, must not create a crash in demand from other countries. Lets not forget that the UE rate in China is rocketing up at the same time China wants to produce the same things that our manufacture revival wants to produce.
We gotta get out of the asset related debt support for the economy and have decent wages for the consumers to support the economy. But there is no warranty that manufacturing is the way to go.
Eric and Vader, you are right. It will take a while. Production jobs do tend to spin off servicing jobs, but the size of the production sector has dropped so much in proportion to services that it will take a long time to produce an overall positive effect.
SpendingPulse said retail sales for Feb dropped 1.1%. That's the reality. Right now gas prices are overwhelming the consumers.
MOM said: "SpendingPulse said retail sales for Feb dropped 1.1%. That's the reality. Right now gas prices are overwhelming the consumers."
Obviously not, if they're still buying the gas.
When they stop buying so much gas and driving up the price with their buying, that will be the point at which they are "overwhelmed."
Just having to prioritize spending (gasoline or new clothes, for example) instead of simply getting everything you want at the price you want is neither an abnormal condition nor a recessionary one.
It's a sad day when Jas Jain essentially gets it right, that Americans are so spoiled that having to choose one consumer product over another instead of having it all is "hard times.":)
Sebastian
Yea MOM
My best positive guess is a for a few medium to large size foreign ops, like BMW in South Carolina, ThyssenKrupp in Alabama for example and lots of small outfits. I remember one small outfit less than 10 people that produced milk churns for Africa.
However, IMHO, non will support the level of consumption of the last 20 years. Non will simply throw off that much in wages in total. Still it should produce a comfortable middle class life style.
I expect to see the international number fall off as the overseas supply chain adjusts to lower North American demand. I would expect this effect to lag the slow down at home.
Consumer discretionary online shopping king Amazon...is in for a world of hurt, particularly given it's 1999-2000 era current valuation, IMHO.
Thoughts on Amazon, EBAY, and the other online ecommerce companies?
Thanks in advance.
this says it all for those us soon to be on the soup line.
Damn, I Need A Job
Question is can they pass on the increased fuel costs, et al....fast enough to maintain profitability?
USPS is kicking prices up again on May 12th. Beginning this year they have a streamlined procedure to adjust prices with a minimum time-lag. Competitive products (Priority Mail, Express Mail, etc) have yet to be announced (and we're down to 60 days until they change). First class goes up by 1-cent. USPS has something like 5-billion of the price-increase resistant First Class stamps stockpiled to meet the demand just before the increase takes effect. Hell of a way to goose business in the off-season (6-months pre/post the holiday season peak).
A car uses 1.6 ounces of gas idling for one minute. Half an ounce is used to start the average automobile!
It all adds up
At some point, increased shipping costs eat into every advantage that e-commerce has over brick-and-mortar retail, with the possible exception of selection and availability (for those of us living in Podunk).
That depends on how far you have to drive to get to the brick & mortar retailer (gas prices in your SUV) and how difficult it is to locate the item you desire.
If you are searching for something that was retired (from the manufacturer's production) 2-5-10 years ago, then on-line trumps all other methods.
WalMart has (or did have recently) an interesting method called "Site-To-Store". Basically, they had stuff in certain stores that moved ever so slowly, and wasn't well available nationwide. I could order something online, then pick it up at my local store 7-10 days later. I did this last August. The various labels on the package told me that it shipped from a WM warehouse in upstate NY to my local store (in Fla). I presume that WM gets a national pricing plan from UPS (who carried the package). As to total cost, it beat any other retailer w/shipping that I could find on the net (and I picked it up during a normal visit to the WM store).
Sebastian When they stop buying so much gas and driving up the price with their buying, that will be the point at which they are "overwhelmed."
Gas purchases ARE declining. Take a look at the EIA figures.
These are volume figures. Gas supplied in December was the lowest in over 20 years and was the fifth month consumption dropped.
I have a hunch that Jan's figures will be slightly up and that Feb figures will be further down. They're overwhelmed!
Aggregate Nov/Dec gas consumption in 2007 was 10% below 2000 figures, 4.7% below 2006 figures, and 6.2% below 2005 figures.
Grocery stores are hurting too. If you look at revenue figures, sales appear to be going up. If you look at volume figures, sales on a lot of items are going DOWN, and profits are hurting too. See Kroger's results.
When you have so much pressure on the basics, the rest of it is really in peril. Carbonated soft drink sales fell 0.2% in 2005, 0.6% in 2006, and 2.3% in 2007. Total volume fell below 10 billion cases for the first time since 2000. According to Beverage Digest, it is not just soda that's declining - the total LRB market appears to be dropping. The pricier stuff, like fruit juices, dropped far more. In some markets bottled water is dropping. Even during 2001 and 2002, these volumes rose.
Consumer prices are big factor right now. Companies have to raise them, but consumers are price sensitive.
MOM, there you go again, bringing FACTS into the argument... sheesh.
MOM said:
When you have so much pressure on the basics, the rest of it is really in peril. Carbonated soft drink sales fell 0.2% in 2005, 0.6% in 2006, and 2.3% in 2007.
That's scary. People are nervous if they're cutting, as a herd, their soft drink purchases.
But I wouldn't base everything on gasoline sales. Why? I'm starting to, gasp, carpool. So are coworkers. Over twenty of my employees have traded SUV's for used '4-bangers.' (Ok, almost all kept the SUV for the weekend...)
But the soft drinks... that's huge (and scary).
Got Popcorn?
Neil
Forbes.com File Not Found
I have hacked this article up a bit but the points are interesting and may affect international shipping.
"China's trade surplus in February totaled US$8.6 billion (euro5.6 billion), down from a US$23.7 billion in February 2007, according to customs agency data." ...
"China's imports in February surged 35 percent to US$78.8 billion (euro51.4 billion) from the year-earlier period, according to the customs agency.
Exports grew by 6.5 percent to US$87.4 billion (euro57 billion) - a much slower rate than January's 26 percent. That could spur worries that slowing U.S. demand will hurt Chinese exporters and could wipe out thousands of jobs."
"February's monthly trade gap with the United States, China's No. 2 trading partner, shrank 23 percent to US$9.4 billion (euro6.1 billion) compared with the same month in 2007, the customs agency said.
China's exports to the United States fell 5 percent in February to US$16.4 billion (euro10.7 billion), while imports of American goods jumped 33 percent to US$6.1 billion (euro4 billion).
The surplus with the 27-nation European Union, China's biggest trading partner, narrowed by 15 percent to US$10 billion (euro6.5 billion), data showed."
Thanks for the updates MOM. You are exceeding good at this from my layman's perspective. I keep meaning to study your techniques and sources (and CR's) to get a tutorial on economic analysis and what sources to use. Sigh Why is it that all the worthwhile financial toolkits seem to come "some assembly required by user" and "results may vary and will improve with user experience".
Neil, I seem to recall a post on Krugman's blog (or was it here) were a guy that worked at a pizza shop was saying that 5 years ago when he started no one ordered a medium, recently they have become over half their orders. The owner of my local Coffee shop has been saying the same thing - sales are down and people are ordering cheaper items.
i'd think the shipping companies would be heavily into fuel futures like the airlines, neh?
is the decline in soft drinks really attributable to cutting back? i seem to recall hearing that the massive growth for pepsi/coke in the last few years have been the non-carbonated drink markets
funny coupon i just got in my email from a local bbq joint, they're advertising deducting from your bill the price of a gallon of gasoline with a receipt:
"In response to the survey we sent last month, many of you mentioned that rising gas prices are eating away at your barbecue budget. We hope this offer provides some relief!"
MOM said: "Gas purchases ARE declining. Take a look at the EIA figures. These are volume figures. Gas supplied in December was the lowest in over 20 years and was the fifth month consumption dropped."
But they're not cutting back far enough to bring down prices.
In looking at the EIA link you posted (thank-you), gasoline consumption was substantially higher in 2001 and 2002 than it is now. What sense does that make if gasoline consumption was higher during a full-out, no-doubt-about-it recession than it is now, if gasoline consumption was as significant a consumer tell-tale as you suggest? Why couldn't it simply be that consumers simply started buying higher-mileage vehicles?
Sebastian
UPS relies on hundreds of thousands of part time employees, esp during Christmas, etc. Lots of friends of mine would supplement income by taking a couple shifts at local UPS centers (usually 4 hours a night, 4 days a week). I would suspect that a lot of these part time workers are getting laid off, or having hours cut back. Does anyone know if these types of workers are eligible for unemployment compensation?