Gauging the Economy: Supply Chain Snapshots (Part 2)

In the first post in this series, I provided some highlights from a recent highly detailed post that Bob Ferrari penned over on Supply Chain Matters, examining volume trends among shippers and 3PLs. Today, I'll continue the analysis, sharing some other findings from Bob's post and offering some additional thoughts. Perhaps most interesting from a logistics perspective -- and especially a ground perspective -- is a quote that Bob shared from J.B. Hunt's recent quarterly report that noted that the company experienced higher volumes across its "international segments, Dedicated Contract Services and truck segments." Commenting on the logistics trends it observed in Q1, J.B. Hunt notes, "The freight recession we have experienced for over three years showed signs of yielding to moderate volumes improvements throughout the current quarter. We believe that this is partly attributable to increases in our customers supply chain activities and partly due to a continued shrinkage of available capacity."

It's not just ground, ocean and air freight that seems to be re-gaining volume. The logistics industry is also getting itself back on the rails, so to speak. In this regard, Bob notes that the "Association of American Railroads noted overall freight traffic up 2.2%" yet "traffic remains well below 2008 levels." It's curious to note that CSX, who saw "overall freight volumes up 5%," specifically noted an "increased shipping activity in metals." In comparison, RailAmerica saw in March that "carloads rose 8.7% from a year ago" with particular strength in increased shipments of "agricultural products, chemicals, metallic ores and metals." And Union Pacific saw "business volumes up 13% compared to a year ago" and "double-digit increased shipping activity in automotive, intermodal, chemicals and industrial products."

Reading into Bob's analysis, it seems pretty clear to me that Q1 was definitely a logistics bright spot, especially in North America. But Q2 could very well see a reversal of the trend, especially in global markets given the potential for the Greece economic contagion to potentially spread to Spain, Portugal, Ireland and other countries facing potential defaults and significant debts. Moreover, let's not discount the massive budget deficit that keeps growing in the US. This all leads me to believe that we could see a bit of an irony in material prices compared with logistics volumes in the coming quarters and years. But if inflation begins to take hold, which could stifle growth, and we see increased speculation and investment in commodities, we could very well find ourselves in a situation where commodity prices (e.g, metals, plastics, chemicals, etc.) are rising, yet real demand is not following as quickly. In that case, those logistics numbers won't look anything like they did in Q1.

- Jason Busch

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