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11/08/2012

Sandy, Santa, and Shipping

In the wake of a natural disaster such as Superstorm Sandy, probably the last thing most of us think about is the impact on commerce. Sandy hit the Northeast with a vengeance more than a week ago, yet terminals at the ports of New York and New Jersey were finally restoring operations eight days after she made her way inland. Also affected by storms of this magnitude are air cargo carriers, railroads, and trucks, all modes of transportation involved in the movement of goods. Quite literally, despite the somewhat regional scope of a natural disaster, commerce on a wider basis can come to a standstill.

Over the past several years, the transportation sector has faced adverse economic conditions that have challenged the movement of goods, and the Trade and Transportation Advisory Council of the Jacksonville Branch of the Atlanta Fed has provided us with anecdotal intelligence from various parts of the transportation industry since 2008. Coincidentally, on the day after Sandy's landfall, the Atlanta Fed convened a meeting of the this council, coordinated by the Regional Economic Information Network (REIN) team at the Jacksonville Branch, to hear first-hand about demand conditions, employment, as well as the short- and medium-term business outlook.

A poll of council members shows that sluggishness remains in the transportation sector across the Sixth District. Current demand, while slightly higher year over year, is expected to stay flat over the next three to six months; employment levels remain flat year over year, and there are no reports of widespread hiring over the longer term. Sentiment about future business conditions, however, is more upbeat, with expectations for some improvement over the medium term. However, uncertainties about the outcome of the presidential election (since resolved), the fiscal cliff, tax laws, and health care costs remain in the forefront.

When asked about the "peak season," which historically represents the holiday shipping season, council members with insight to holiday goods shipments and inventory levels were skeptical about robust activity. We were told that there had not been a "peak" season in the past four years, and the traditional shipping timeframe has shrunk from October until mid-December to Thanksgiving until just before Christmas. This reduction supports the notion that retailers are managing tighter inventories and that "just-in-time" ordering has become the norm. Out of necessity, the supply chain has become more efficient over the past several years, and the days of keeping elevated inventory levels are gone. This shift, coupled with the challenges facing commerce flowing through the Northeast, may well result in bare shelves inside some retail establishments. So if there's a hot item you're planning to buy for yourself or a loved one this holiday season, you might want to purchase it sooner rather than later, because it might just not be available when you head out for your holiday shopping.

By Sarah Arteaga, a REIN director in the Jacksonville Branch of the Atlanta Fed


November 8, 2012 in Retail, Shipping | Permalink

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