Snow, sleet and freezing rain may be impeding visibility on U.S. highways, but the impact of severe winter weather on the U.S. economy is clear in the Institute of Supply Management’s latest economic indices. The January PMI index of factory activity, released Feb. 3, declined 5.2 percentage points from December to 51.3, its eighth straight month of growth but its lowest reading since October 2012.
The ISM New Orders Index dropped 13.2 percentage points in January to 51.2 — that index’s biggest plunge since 1980 — while the Production Index fell 5.6 points to 54.8, both indications the economy is growing at a slower pace in early 2014.
Those numbers spooked investors, contributing to a drop in U.S. stock prices, and raised questions about the accuracy of the ISM manufacturing index, which declined much faster than the Markit Manufacturing Purchasing Managers Index. The Markit PMI dropped from 55 in December to 53.7.
Shipments delayed by weather
Among the ISM indices that did climb was the Suppliers Deliveries Index, which rose to 54.3, an 0.6 point increase from December and a 1 point increase from November. That jump confirms what anyone who has been outdoors in the past two months knows — this year’s frigid weather is hitting supply chains in their weak points. The higher the SDI rises, the slower deliveries get. Since early December, storms have repeatedly hit the Midwest, Northeast, Mid-Atlantic and Southeast.
Ten industries reported slower supplier deliveries in January, from the makers of plastics, rubber and paper products, to appliance and electronics manufacturers. Eight industries reported no substantial change in deliveries since December.
“We have experienced many late deliveries during the past week due to the weather shutting down truck lines,” a plastics maker told the ISM. “Poor weather impacted outbound and inbound shipments,” a metals manufacturer said.
Flight disruptions alone cost the U.S. $2.5 billion in lost productivity and productivity in January, ABC News reported, with airlines losing between $75 million and $150 million, according to cloud-based data and software company MasFlight.
Storms have widespread impact
Successive snow storms slamming the Northeast are being blamed in part for drayage chassis shortages at the Port of New York and New Jersey, the largest East Coast port, and Midwestern rail terminals. Excessively cold temperatures from the polar vortex slowed western U.S. trains and snow and ice from Michigan and Minnesota to as far south as the Gulf Coast states delayed trucks in January.
“You can go from Minneapolis to Chicago to Detroit to Cleveland, over to Boston, down to New York and Norfolk, and come back through Cincinnati — that’s your path of congestion and severe chassis shortages,” said Jason Hilsenbeck, owner of Load-Match and Drayage.com. “It’s all due to the weather.”
Hilsenbeck also said the weather, particularly in the Midwest, has left some warehouses and plants short-handed (schools close, and somebody's got to watch the kids) and has slowed the unloading of containers and trailers and the overall velocity of the system.
“It’s affecting us all,” Jeff Heller, vice president of intermodal and automotive marketing at Norfolk Southern, said in reference to the frigid weather of early January at the SMC3 JumpStart 2014 conference in Atlanta Jan. 21. “We have more failures on the locomotive side, and when we get the trains running, traffic backs up at our terminals.” That was a full week before a three-inch snowstorm caused massive gridlock in Atlanta Jan. 28, an epic mess that wasn’t fully cleared for days.
Even without snow, Atlanta is the fourth worst city in the U.S. for truck delays, costing businesses $775 million a year, according to the 2011 Urban Mobility Report from the Texas Transportation Institute. While Atlanta was stuck in what could be called “snowlock,” the Southern winter storm closed ports from Virginia to Texas.
Another round of storms coming
The first week of February began with a fresh round of snow and more wintry blasts on the way. Winter storms are expected to dump anywhere from a few inches to more than foot of snow from the Rockies across the northern U.S. to New England Feb. 4 and 5. More than 118 million people in the U.S. are under some form of winter weather warning, according to weather.com. More than 1,500 flights were delayed or canceled Feb. 4.
Want to know where the latest delays are? Check the website of parcel carrier UPS. The site showed weather-related delivery delays in parts of Arkansas and Kansas Tuesday afternoon. By 2:17 p.m., no pickups or deliveries were available in several zip codes in those states. On its website, UPS said it secures shipments in its facilities during storms and, where possible, redirects them in order to speed delivery.
Norfolk Southern is warning customers that ”extreme weather conditions” could delay shipments moving across the Midwest and Northeast by 24 to 48 hours, and extreme temperatures combined with snow and ice could cause some local service to be curtailed.
Expediters could benefit
If anyone should be making money while the snow falls, it’s expedited transportation companies that provide emergency services that keep production lines moving when supply chains get snarled. Look to see evidence of that emergency demand in the quarterly results of Arkansas Best’s Panther Expedited, XPO Logistics’ Express-1 and FedEx Custom Critical in a few months.
And a spring thaw could release significant pent-up demand as consumers return to car lots and big box stores, just as retailers begin ramping up imports in March, the start of a shipping season some truckers see as “the new peak.”
“After allowing for companies that saw production and sales disrupted by the cold weather, the rate of growth of output and orders remained as strong, if not stronger, than seen late last year,” Markit Chief Economist Chris Williamson said after the release of the company’s Purchasing Managers Index last week.
In the meantime, shippers throughout the country have little choice but to plan for unexpected delays and, where possible, try to add a mid-winter cushion to their supply chains.