John’s Blog 2-1-12

Dear Friends,

Politics, the U.S. economy and Europe’s woes all collide to bring us today’s snapshot of what is influencing supply chain issues.

The trucking industry is trying to obtain an increase in truck weight and length in conjunction with the highway reauthorization bill making its way through Congress. The railroads are using all of the political capital they have to keep these trucking improvements from getting into the bill.  The Senate is inclined to keep size and weight out, so it looks like the railroads will prevail in this political battle, for now.

Both trucking and rail shipments remain in positive territory as the U.S. economy continues to show signs of its “slow track” recovery.  However, consumer spending helped drive strong freight results and there is concern this momentum was driven by  heavy December discounting and will not be sustainable.

Consumer spending increased two percent in the fourth quarter, up slightly from 1.7% in the third quarter and 0.7% in the second.  We need to keep a close eye on this trend.  It is apparent that if consumers have the cash or credit, they will spend. The Thomson Reuters/University of Michigan consumer sentiment survey showed consumer confidence rising significantly from December to January.

Manufacturers continue to keep a close eye on exports to Europe. The ongoing turmoil in the Eurozone over Greece and other countries like Portugal creates a drag on stronger economies such as Germany. This weakens the Euro and hurts U.S. manufacturers, who count on Europe for 25% of all exports.

The steady increase in freight costs from China, coupled with rising wages in the Chinese manufacturing sector, is helping U.S. manufacturers. Capacity issues affecting Chinese supply chain reliability also are causing manufacturers to look at re-shoring, or near-shoring in Mexico.

The U.S. housing market continues to fester. Tuesday’s S&P/Case-Shiller Index puts a damper on hope for a quicker recovery. The index slipped down 1.3% from October to November.  This 20-market index covers all housing prices including jumbo loans and those in creative mortgages, so hopes we have seen the bottom seem unfulfilled.

The National Association of Realtors said existing home sales increased five percent in January, so at least houses are selling.  It remains a buyer’s market as the median price was down 2.5% over January 2010.

The American Trucking Association’s seasonally adjusted truck tonnage index was up almost 7% month-to-month and 10.5% year-over-year at 124.5 for December. This dramatic increase was attributed to strong manufacturing activity coupled with retail restocking.

ACT Research said that Class 8 truck orders bounced up 68.6% in 2011 with 305,393 trucks ordered.  It appears that motor carriers are into the replacement mode in a big way.  The question is, how much of the increase was due to additional capacity and how much was companies taking advantage of an expiring depreciation benefit?

Intermodal traffic was up for the week ending January 14^th by 7.4% according to the Association of American Railroads.  Container volume increased 8.4% to 197,716 units while trailers on flatcar improved 1.3% to 31,375 units.  Excluding intermodal, other carloads rose 5.5% to 298,560 units.

At Wagner we are off to a good start.  The Leadership Team is out meeting with our associates across the U.S. sharing the Wagner mission and vision, explaining our key messages, and reviewing goals for 2012.

In transportation, Wagner continues to keep our promise to our associates to provide them with the best possible tools as we integrate the Mercury Gate transportation management technology.

We continue to work on many great opportunities while collaborating with clients to find a better way to take merchandise to market.  Are you doing a supply chain tune up and adding distribution locations?  Looking for a provider who can ship to a big box retailer meeting compliance requirements AND ship direct to consumer?  Want to repackage or kit to meet a club store requirement?  Provide materials management supporting a manufacturing plant?  Move loads when trucks are in short supply?  Call Wagner and Bring it!

Have a great day!

John Wagner Jr