|
By Dean Croke, DAT Solutions
Entering 2021, natural economic cycles, freight volumes, transportation prices, and even conventional ways of doing business remain out of balance, more so for some commodities and industries than others:
- U.S. e-commerce sales grew 40% to reach $839 billion last year. Online sales accounted for 21% of total retail sales in 2020, up from 16% in 2019 and 14% in 2018.
- Compared to pre-pandemic habits, average weekly grocery spending grew 17% in 2020. Sales of center-store grocery items—household cleaners, paper goods, frozen food, and shelf-stable food—increased more than 10% in 2020, according to a survey conducted by Supermarket News. A Deloitte study showed that more than half of consumers say in-store shopping is stressful; they're visiting less often.
- It was a devastating year for restaurants. At $659 billion, restaurant and foodservice industry sales were 27% below expectations in 2020 and more than 110,000 eating and drinking places were closed for business temporarily, or for good.
- IHS Markit said its manufacturing Purchasing Managers Index climbed to 57.1 in December, a five-year high, after plunging to its lowest point in more than a decade in April. Makers of consumer goods saw weaker order flow as COVID-19 infections surged and limited spending during the final month of 2020, while producers of machinery and equipment noted strong demand in a potential sign of improving business investment.
In trucking, it's going to be difficult to make year-over-year comparisons for 2020—we don't have any other pandemic years to establish a meaningful benchmark. Truckload freight volumes ended 2020 up 2% year over year but that doesn't tell the whole story. Contract freight volumes were down 8% compared to 2019 while spot market volumes increased by more than 86%.
Last year we saw rates decline in January and February as expected, swing unpredictably in March as consumers stuffed their pantries, drop precipitously in April and May, and then launch into the most sustained in pronounced period of spot rate growth in history from June through the end of the year.
So rather than look back, let's look ahead at some key indicators affecting our outlook for early 2021.
- Diesel prices: The average price of on-highway diesel slumped during 2020 and was $2.37 per gallon to start November, the low point for the year. Eight weeks later, the price was up 33 cents to $2.70 a gallon. A surge in fuel prices can increase costs and reduce per-mile revenue for a carrier, and smaller fleets and owner-operators—a critical source of flexible capacity for shippers of truckload freight—are especially vulnerable.
|
- Truck orders: Class-8 retail truck orders topped 283,000 units in 2020, with more than half the total coming in the last quarter of the year, according to ACT Research. Given the current backlog at truck manufacturers, vehicles ordered last October, November and December won't come into service until the middle of 2021. The last time truck orders were this hot was July and August 2018 when spot rates were at multi-year highs. It was months before those orders could be filled and delivered, and by May 2019 the economy had weakened. Freight volumes declined and overcapacity began to pull truckload rates lower. A rash of carrier bankruptcies followed.
- Spot rates: Spot van rates have been sliding all month. For the week ending Jan. 23, the national average dry van rate was $2.17 a mile, down nearly 10 cents since the start of the year but still 53 cents higher compared to the same week in 2020. With contract rates now 16% higher year over year and rising, expect more downward pressure on spot rates in the coming weeks. A drop in demand would accelerate that correction.
There's one more number I'm watching, and it has less to do with the movement of freight than it does the movement of people.
Google's latest COVID-19 Community Mobility Report is based on map data and shows changes in visits to various types of places in each geographic region compared to the period from Jan. 3 to Feb. 6, 2020.
Mobility trends for retail and recreation locations—restaurants, cafes, shopping centers, theme parks, museums, libraries, and movie theaters—are down 26% as a national average over the last 11 months. California and New York, two states with huge consumer economies, are both down 37%.
The numbers suggest we're moving around less and less over time, which is a concern in a consumer-driven economy. When we move less, we spend less.
Like 2020—and 2019 and 2018 before it—this is shaping up to be a very different year for freight. The data says it's looking less and less like the U.S. economy will return to its old ways and instead will find a new normal.
Dean Croke is the principal industry analyst at DAT Freight & Analytics, which operates in the industry's largest load board for spot truckload freight, and a data analytics program based on $126 billion in annual spot and contract freight transactions. For information, visit dat.com.
|
