The Roemer Report: December 2018

Truckers Driving the Biggest Christmas in Years

If whoever is at the reins of the sleigh and steers the reindeer to drop off presents at kids houses this Christmas is Santa Claus, then that makes just about every truck driver in America this holiday season St. Nick!

Trailing Thanksgiving, Black Friday’s numbers appear robust; retailers are surely thankful and some kids, apparently, are going to be very thankful this Christmas: Nintendo reported more than $250 million in sales between Black Friday and Cyber Monday. Nintendo said they’re just getting started.

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Package blizzard hits Midwest hard!

If anything, Black Friday’s 2018 numbers are revealing the shift away from America’s traditional shopping habits. While in-store traffic was down, online sales were sharply up compared to the shopping season last year. According to Giselle Abramovich at CMO. (cmo.com), Americans had more on their minds than turkey and pumpkin pie over the holiday weekend.

With the possible exception of several million Ohio State University fans and their vanquished rivals on the following Saturday, from November 22 through 26, consumers spent some $24.2 billion shopping online; that’s quite a blizzard of packages.

Those statistics came from Adobe Digital Insights (ADI), which analyzed aggregated and anonymized data via Adobe Analytics. All-in-all consumers shelled out 23% more cash this year than what they spent over the same period in 2017.

According to Abromovich, that’s really good news. Great in fact, but she points out the bigger story is the $10.1 billion, mobile spend which accounted for 41.7% of the overall total. That’s up a “whopping” 44% from last year, she says and proving shopping has become digitally untethered from most everything—everything except trucks and delivery drivers apparently.

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Exceptional fourth quarter

Certainly by now most everyone in the country can agree the economy has some real lead in its pencil. The Wall Street Journal reported November 30, that “powered by strong income gains” America’s consumers’ spending more this October. Eric Morath noted “Consumers could prove to be the silver lining for the U.S. economy,” amidst, he says, a “jittery stock market and global uncertainty” which is welling up some dark clouds for investors recently.

Here’s the longer-term kicker: “Rising wages and lower taxes have boosted Americans’ incomes, while price increases are slowing, giving them real spending power.” Power indeed; Morath explains that could allow consumer spending (two-thirds of total output) to help extend the already nine-year economic expansion happening now.

More good news from the sector

Donald Broughton, chief market strategist for FreightWaves explains that inbound import container volume coming into our ports is a key indicator of logistics and trucking industry health. This volume, he says, reveals coming demand for trucking, especially dry van trucking.

Another way to follow the data, he notes, can be found in SONAR under RTOIC.USA (Rail Traffic Originated by Intermodal Containers in the US). Broughton says this weekly data, includes volume picked up by all the railroads, both international containers coming into the ports and domestic containers from carriers like JB Hunt. The volume of inbound international containers, he maintains, has historically been” highly correlated with strong consumer spending, especially in the fall.”

Summing it up, Broughton happily reports all is well, finding that with rail container volume data predicting strong consumer spending, the consumer economy is still firmly in the business of “making things, shipping things, and buying things.”

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Not enough Santas, not enough sleighs

American consumers drive the economy and drivers and shippers are now even more integral to the process because of how shopping has evolved. While many lament the demise of brick and mortar retailing, don’t start crying too soon; online Black Friday sales numbers for large retailers like Wal-Mart were trending higher showing that the dinosaurs of retail were migrating to new feeding grounds successfully.

ATA statistics find more than 70% of all domestic freight is carried by trucks, and although a good portion of it is offloaded from trains, trucks are still the primary “bringer” of Christmas and most everything we eat, drink, work and play with all throughout the year. But things are getting a bit tight.

With all this tremendous need for consumer goods shipping, constraints on the system and its capacity to deliver Christmas (among other things) to Whoville are beginning to appear. Some economists are predicting some real grinching on the horizon because shipping costs are rising as a result and that could raise the price of many of the goods consumers are consuming.

One report in the Connecticut Post says Amazon experienced a 38% increase in shipping costs the first quarter of this year. In response, the company was prompted to raise the price of a Prime subscription about 20% to coempensate for its higher shipping costs.

The driver shortage and its accompanying alarm are almost becoming cliché’ in the industry but it’s not going away. There are likely plenty of Santas out there willing to drive a Class-8 sleigh, but not so willing considering the current working conditions and pay rates the industry is offering.

The dynamics and energy of the consumer economy are increasing the demand for shipping, but supply is lagging and most freight shippers respond accordingly. But these inflationary forces are bringing healthy change and better wages to drivers. Are there other solutions? Thirteen-year trucker and sociologist Steve Viscelli, quoted in the Connecticut Post story says maybe it is time to change the system and pay truckers for actual hours on the road (not just mileage), including the time drivers are forced to endure waiting for a new load of Christmas presents.

However your Christmas and traditional family celebrations are delivered this year, all of us at Assured Partners of Ohio and Roemer Insurance wish everyone in the industry the very, very best and many happy returns for the coming year. God bless and take care!

Bobtails: