The day of reckoning is coming
The Transports came back off the ledge (again).
One of my good Twitter friends sent me an interesting article—from MSN Money of all places—about the trucking business. As you know, we’ve spent a lot of time recently talking about the Dow Jones Transportation Average (DJTA). Here’s the bottom line: we lose the transports and we will lose the market. Of that, there can be no doubt about it. I’m going to give you the highlights of this article called “The Trucking Business Is Delivering Chilling News About The Economy." According to this article, the $700 billion U.S. trucking industry is 69% of the nation’s freight is an early warning system to the economy.
Rates for containers carried by rail dropped on a year over year basis for the 1st quarter which had a very poor GDP. Cass Intermodal Price Index said rails were facing weaker demand and losing price power as shippers switched to trucks because diesel was cheaper than before.
Seems like a good thing, right? Think again.
Spot rates for tractor-trailers started dropping in April which is NOT the 1st quarter. Over the road shipping volumes fell 5% in March compared to the prior March. In April shipping volumes fell again, this time by 2.5%. Businesses have been building inventory at the same time sales have been slipping. People might claim it was the cold weather, but sales are going to have to start picking up or this will be the early indication.
I always joke that Union Pacific Railroad isn’t delivering to my house anytime soon while UPS or Fedex shows up all the time. If you look at a chart of UNP vs. UPS you can see an amazing divergence, this just in the transportation arena.