Spring arrived early, in more ways than one, for shippers, carriers and transportation intermediaries serving the U.S. market. After a largely uneventful winter marked more by unease over the economy than by the weather, freight volumes appear ready to bloom, according to several economic indicators.
Unseasonably warm weather has drawn consumers into home improvement centers, auto dealerships and malls, and encouraged retailers to build inventories, albeit cautiously, in expectation of future sales.
Government data confirmed the impressions of anyone who’s visited a Home Depot or Lowe’s in recent weeks. Retail sales excluding gasoline increased 0.7 percent from the previous month, led by 3 percent jump for building materials and garden supplies dealers.
Related: Exports Gain Steam.
Retail sales and other consumer spending account for two-thirds of U.S. economic activity. As unemployment rates edge downward, manufacturing expands and the depressed housing market stabilizes, Americans have resumed shopping. Consumer spending has risen for 10 consecutive months.
And just as April showers bring May flowers, increased consumer activity leads to shipping volume. Journal of Commerce Economist Mario O. Moreno estimates containerized imports rose less than 1.5 percent year-over-year in the first quarter, but will grow 2.2 percent in the second quarter and 7 to 8 percent in the third quarter.
“I’m cautiously optimistic about the months ahead,” Moreno said. “I expect a continuation of a recovery that will be modest, but still a recovery. If the housing and jobs markets continue to improve, retail sales and imports should also rise.”
Global Port Tracker, the monthly report by the National Retail Federation and Hackett Associates tracking 10 major container gateways, expects a similar pattern. “Our forecast for the remainder of the year has brought us back to the traditional peak season patterns,” said Ben Hackett, founder of Hackett Associates.
Containerized imports during the first two months of this year were flat with 2011, PIERS data show, but those numbers were skewed by the early Lunar New Year, which disrupted shipments from China.
Container volumes at Los Angeles and Long Beach rebounded in March. Imports through Long Beach jumped 18.3 percent and exports rose 10 percent from a year earlier. Los Angeles had a 9.3 percent gain in imports, while exports slipped 2.4 percent.
Despite concerns that some of this year’s gains have been weather-related, gradual improvement in still-weak jobs and housing markets is bolstering consumer confidence and encouraging hope among retailers. Chain store sales rose 4.1 percent in March, according to the International Council of Shopping Centers.
The Reuters/University of Michigan consumer sentiment index for April slipped to 75.7 from its one-year high of 76.2 in March. The index’s gauge of expectations in six months jumped 2.7 points to 72.6, its highest level since September 2009 when the U.S. was climbing out of recession.
“Retailers are continuing to watch rising gas prices, but job gains and other indicators show the economy is strengthening,” said Jonathan Gold, the NRF’s vice president for supply chain and customs policy. “All of this should improve consumer confidence and lead to increased spending, so retailers are cautiously building up their inventories.”
The Port Tracker report expects first quarter volume through the 10 ports it follows will be down slightly from a year earlier but sees volumes increasing steadily to more than 1.4 million 20-foot equivalent units in August.
Surface transportation volume also is rising gradually. The American Trucking Associations’ seasonally adjusted For-Hire Trucking Index rose 0.5 percent in February. It was the sixth increase in seven months, and followed a decline of 4.6 percent in January.
Trucking volume is heavily influenced by domestic manufacturing growth, and is benefiting from increased demand for automotive parts and shipments of finished vehicles from plants, ATA Chief Economist Bob Costello said. He said slow recovery of housing and consumer spending also has contributed to an increase in truck shipments.
“Even indicators that are relatively low have been trending up a little bit, and all of that impacts truck freight volumes,” Costello said. “Even if these indicators aren’t going gangbusters, you add it all up and it helps.”
Rail freight statistics indicate growth in manufacturing and construction. Rail carload traffic through April 7 this year was down 2.9 percent, but that was mainly because of declines in grain and coal, the Association of American Railroads reported. Rail intermodal traffic rose 2.4 percent to nearly 3.2 million units of containers and trailers.
Shipments of motor vehicles and equipment jumped 18 percent; metals and materials rose 10.8 percent; metallic ores, 16.1 percent; and lumber and wood products, 9.9 percent. Petroleum shipments soared 28.7 percent, largely because of shipments from the Bakken field in North Dakota, which is not directly connected to pipelines.
Manufacturing growth remains one of the economy’s bright spots, but has slowed in recent months. The Federal Reserve’s March report on industrial production showed total production flat while manufacturing output declined 0.2 percent from February.
Some of the decline probably was affected by weather-related comparisons, but the numbers suggested “a period of more moderate growth” for manufacturing, said Cliff Waldman, economist at the Manufacturers Alliance for Productivity and Innovation.
MAPI’s quarterly index of manufacturing activity slipped to 65 from 66 in last December’s survey. It was the index’s seventh straight decline since hitting a record 81 in June 2010, but the index remains well above 50, the dividing line between expansion and contraction.
A bulwark of U.S. manufacturing is the auto industry, which is enjoying higher sales fueled by pent-up demand. The average age of cars on U.S. roads now exceeds 10 years. Most analysts project that U.S. sales of light vehicles this year will be at least 14 million units, compared with 12.8 million last year, but well below the average of 17 million a year in the decade ending in 2007.
Increased U.S. auto production, combined with shipments of aftermarket parts, are revving up imports of automotive parts. Auto parts imports jumped 14.2 percent to 109,316 TEUs in the first two months of 2012, and represent the second-largest containerized import commodity, behind furniture.
If anything derails the recovery, analysts say, it may be gasoline prices. More money spent at the pump means less spending on discretionary purchases. Gasoline prices have inched up in recent weeks and ended March at a nationwide average of $3.973 a gallon, compared with $3.358 at the start of the year.
Persistently high unemployment numbers also are tempering projections for the economy and shipping volumes. Employers added only 120,000 jobs in March following three consecutive months of 200,000-plus gains, the Labor Department said. The unemployment rate fell to 8.2 percent, a three-year low, reflecting a decline in the number of Americans seeking work.
Economists will watch the Labor Department’s next employment report to gauge whether the March figures were an aberration or something more. Some 12.7 million Americans remain unemployed.
Any discussion of the U.S. economy circles back to housing, the sector that triggered the 2008-09 financial crisis and recession. Key statistics suggest the housing market is stabilizing but still struggling to gain momentum in a choppy recovery.
The National Association of Home Builders’ Improving Markets Index this month listed 101 metropolitan areas with six consecutive months of improvement in employment growth, home price appreciation and growth in single-family building permits. The index has risen for five straight months.
The association’s builder confidence index slipped in April to 25 from 28. The decline brought the index back to where it was in January, which was the highest level since 2007. A reading below 50 indicates negative sentiment.
“What we’re seeing is essentially a pause in what had been a fairly rapid buildup in builder confidence that started last September,” NAHB Chief Economist David Crowe said. “This is partly because interest expressed by buyers in the past few months has yet to translate into expected sales activity, but is also reflective of the ongoing challenges that are slowing the housing recovery — particularly tight credit conditions for builders and buyers, competition from foreclosures and problems with obtaining accurate appraisals.”
A healthy housing market is key to shipments of building materials and imports of goods such as furniture, which buyers frequently purchase when they acquire a new home. Imports of furniture, which account for about 10 percent of total containerized imports, declined 3.6 percent year-over-year to 285,428 TEUs in the first two months of 2012, according to PIERS.