Economy Matters logo

About


The Atlanta Fed's SouthPoint offers commentary and observations on various aspects of the region's economy.

The blog's authors include staff from the Atlanta Fed's Regional Economic Information Network and Public Affairs Department.

Postings are weekly.


SouthPoint

10/27/2014


Southeastern Transportation Continues Rolling

Members of the Atlanta Fed’s Trade and Transportation Advisory Council met in Atlanta on October 8 to discuss the latest updates on and insights into the industry. Most council members reported expansion continuing into the fourth quarter. Year over year, demand was greater across the majority of industries represented. In rail, shipments of frac sand, which is used in the hydraulic-fracturing process (commonly referred to as fracking) to produce petroleum products such as oil, natural gas and natural gas liquids from rock, and crude oil were up substantially, and intermodal volumes were steadily rising as a result of trucking capacity constraints. Ocean shippers reported a shift in the modes of movement of commodities, which were historically shipped in bulk but are now shipped in containers, causing a shortage of containers for traditional use. Demand in the flatbed trucking market was very strong, with shipments of drywall and bulk cement increasing. Going into the holidays, logistics firms anticipate e-commerce volume to pick up substantially by mid-November.

Employment
Reports on current employment levels this year versus last year at this time were mixed. More than half anticipate just slightly higher staffing levels this time next year. Truck driver turnover for the overall industry is quite high. For new drivers, turnover within the first 90 days of employment is very high. Trucking firms reported that only a very small percentage of applicants are hired, as many do not meet driver requirements.

Costs, wages, and prices
Most reported moderate increases in nonlabor input costs. Wages were reported as modestly increasing across most transportation industries with the exception of trucking, where wages continued to increase at a clip of 6 percent to 7 percent annually. Reports on increases in health care premiums for 2015 varied, ranging from less than 1 percent up to 20 percent. Some companies reported anticipated changes to plan structures to mitigate expenses, and others plan to share rate increases with employees. Regarding pricing power, a few reported an ability to raise prices, but others reported significant pushback by clients. Trucking firms plan to continue raising rates amid rising demand, reduced capacity, and continued increases in driver pay.

International trade issues
According to council members, the net impact of the recent strengthening of the dollar had been minimal on international activity when this meeting was held. A slowing trend in world trade was cited by one council member as the biggest factor affecting both imports and exports.

Overall, the sentiment of this group has improved since the last meeting in April, and all council members reported a higher outlook for short- and medium-term growth, with greater confidence in their forecasts. Council members were asked to cite the single most challenging issue facing their industry today. Trucking firms indicated that the lack of truck drivers and increased industry regulations will continue to cause diminished capacity for the foreseeable future. In maritime trade, ongoing ocean carrier consolidations will impact all U.S. container ports and there will be both winners and losers as a result of the carriers’ decisions.

What impact will these challenges have on commerce? The council meets again in April 2015. We’ll watch as conditions play out, and we’ll relay the information here.

By Sarah Arteaga, a Regional Economic Information Network director in the Atlanta Fed's Jacksonville Branch

October 27, 2014 in Economic Indicators, Shipping, Southeast, Trade, Transportation | Permalink

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a011572565d3f970b01bb07a05cb1970d

Listed below are links to blogs that reference Southeastern Transportation Continues Rolling:

Comments

05/01/2014


Will 2014 Be a Tipping Point for Logistics?

The Atlanta Fed’s Trade and Transportation Advisory Council convened in early April in Jacksonville, Florida. Overall, the tone was encouraging compared with last year’s September meeting, when members reported decelerating activity during the summer. This time, a majority reported expanding activity during the fourth quarter and into 2014, despite the impact of unseasonably harsh winter weather. Additionally, the expectation for demand over the short term is for continued growth at a slightly higher pace.

District port contacts were upbeat, citing a rise in energy exports, steel imports, and higher container volumes. Trucking companies reported very strong freight volumes, which appears to them as real demand and not just a rebound from severe winter weather. It is important to note that the industry continues to operate with about 20 percent less capacity than prerecession levels, and capacity constraints are beginning to limit the movement of goods on highways.

Similar to past years, the railroad industry continues to see modest gains in intermodal traffic and shipments of grain and industrial equipment. Construction products were down slightly, along with significant declines in export coal. In air cargo, revenues are reportedly back to 2007 levels, albeit with only slightly higher air freight volumes boosted by international activity and sharp declines in domestic cargo.

Employment and pricing
Council members indicated employment levels remained stable, with no anticipated increase in staffing levels over the short term. In trucking, struggles to find drivers continue, and regulations have eliminated between 2 percent and 4 percent of drivers and have also reduced the number of hours and miles allowed for drivers. Hiring diesel mechanics has also become a challenge.

Besides the trucking industry, which has steadily been increasing driver pay, council members generally reported no significant upward pressure on labor costs, outside of cost increases for health insurance. As a result of capacity constraints, however, trucking companies project carrier rate increases of between 4 percent and 6 percent, on average, in both the near and longer term as supply and demand dictate. These capacity constraints are creating opportunities for rail carriers, who are seeing more pricing power as well.

International trade
In terms of growth rates of the value of air cargo, regions that should drive demand for U.S. exports include the Middle East, driven by Gulf countries, the United Arab Emirates, Saudi Arabia, and Israel; Asia (specifically China, Hong Kong, and Singapore); Europe, concentrated in areas in Western and Eastern Europe recovering from or not affected by euro zone issues; and Latin America and the Caribbean (and mostly Brazil). Air trade activity should remain flat.

District ports expect cargo volumes in 2014 to grow by up to 5 percent with strong increases in imports while exports will grow more slowly. Asia will remain a primary market for food exports from the United States, and some regions of Africa (chiefly in the western and southern areas) will be target markets for U.S. exporters as the demand for oil, gas, and food products increases.

Geopolitical concerns present potential downside risks for trade flows, and labor issues at West Coast ports could interrupt trans-Pacific trade. Congested and outdated highways, combined with a shortage of truckers, will eventually hamper the inland movement of goods. For example, the lack of funding for dredging or for antiquated lock systems at District inland ports and seaports could stunt growth.

In the near future
Overall, our Trade and Transportation Advisory Council members were upbeat and see two related tipping points approaching. First, prices are on the verge of increasing more rapidly as businesses are forced to pay more as freight charges, especially for trucking and rail, increase. Second, capacity constraints might suppress growth as demand-side bottlenecks in the movement of goods become more frequent.

By Sarah Arteaga, a Regional Economic Information Network director in the Atlanta Fed's Jacksonville Branch


May 1, 2014 in Economic conditions, Employment, Exports, International, Logistics, Shipping, Southeast, Trade, Transportation | Permalink

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a011572565d3f970b01a73db8abdb970d

Listed below are links to blogs that reference Will 2014 Be a Tipping Point for Logistics?:

Comments

04/10/2014


Southeastern Manufacturing...a Lion or a Lamb?

Remember the saying, “March comes in like a lion and goes out like a lamb?” Its origin is believed to be related to the position of the constellations Leo (the lion) and Aries (the lamb) during the month of March. Some observers suggest that it’s simply an indication that the weather is changing, with the end of winter at the first of the month and the beginning of spring at the end of the month.

I’m not sure which is true, but the weather wreaked havoc on the manufacturing industry the last few months. January and February were particularly tumultuous. Manufacturing contacts in the Southeast reported difficulties receiving supplies, shipping orders, and operating production lines at full capacity because some employees were unable to report to work during those two months. The Atlanta Fed has been monitoring the effects of extreme winter weather on the manufacturing industry. The March Southeast Purchasing Managers Index (PMI) suggests that manufacturing has come back roaring, but we should watch out for a bit of bleating (see the chart).

The Southeast PMI is produced by the Econometric Center at Kennesaw State University. A reading on the index above 50 represents an expansion in the manufacturing sector, and a reading below 50 indicates a contraction. The survey provides an analysis of manufacturing conditions in Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. Representatives from various manufacturing companies are surveyed regarding trends and activities in new orders, production, employment, supplier delivery time, and finished inventories.

The March Southeastern PMI report came in quite strong. The overall reading of 61.5 was its highest since April 2012. There are a couple of different ways to interpret the strong report. With option one, the report is a result of businesses making up for lost production and order backlogs during the previous months, therefore pushing up production and new orders during March. Under option two, underlying demand is improving and will be robust going forward, and March is just the beginning of a strong year. Let’s take a look at the numbers.

The overall March PMI increased 5.5 points over February. The new orders subindex soared 11.2 points to 70.2 and the production subindex vaulted 10.4 points to 65.4. Going back to January, the new orders subindex has increased 21.2 points and the production subindex has risen 17.5 points. No doubt about it, these are solid increases. The employment subindex increased 6.7 points from February’s 52. The supplier delivery times subindex fell 0.3 point from 57 in February, indicating that purchasing agents are getting their supplies slightly faster than the previous month. The finished inventories subindex also fell 0.3 point compared to February. Optimism among purchasing agents increased during March. Fifty-eight percent of survey participants expect production to be higher over the next three to six months.

Southeast Purchasing Managers Index


Whether option one or option two applies remains to be seen. It could be a combination of both. It will be interesting to see the national Institute for Supply Management report in April. Will the rest of the nation experience a similar rise in manufacturing activity? Let’s hope so. We’d like to see the sharp rise in new orders and production in the Southeast resulting from a sustained improvement in demand rather than just a snap-back effect of improving weather. Either way, we will be keeping our eyes and ears open for the lion and the lamb.

By Troy Balthrop, a Regional Economic Information Network analyst in the Atlanta Fed’s Nashville branch

April 10, 2014 in Inventories, Manufacturing, Productivity, Shipping, Southeast, Weather | Permalink

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a011572565d3f970b01a3fcec1235970b

Listed below are links to blogs that reference Southeastern Manufacturing...a Lion or a Lamb?:

Comments

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

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a011572565d3f970b017d3d6411fd970c

Listed below are links to blogs that reference Sandy, Santa, and Shipping:

Comments

Google Search



Recent Posts


November 2015


Sun Mon Tue Wed Thu Fri Sat
1 2 3 4 5 6 7
8 9 10 11 12 13 14
15 16 17 18 19 20 21
22 23 24 25 26 27 28
29 30          

Archives


Categories


Powered by TypePad