Orders for class 8 trucks, those used to haul goods around our economy, are visibly collapsing. According to FTR Transportation Intelligence, sales for July fell 81% YoY to 9800 units. The market is taking a wait and see approach before ordering new trucks, signalling uncertainty over near term economic growth.
How much is actually being shipped? Cass Information Systems, which tracks North American freight volumes and expenditures, has an interesting chart with regards to freight volumes.
Source: Cass Information Systems
2019 has seen a lower volume of shipments than 2018, and the overall amount starting turning down at about the same time of the year. If shipments are trending down, then it signals the economy is cooling. But we need other confirming factors to determine if this is more than a seasonal change.
DHL is reporting a freight slump for both the US and China, slumping sharply since March of this year.
Source: South China Morning Post
The report indicates that the trade war is affecting trade between the nations, and that policy may not be having its desired effects.
“The declining outlook for US exports indicates that, so far, the US is missing its goal of strengthening its export economy with a harsher trade course against China,” the report said.
Having both China and the US in a slump may indicate more than the trade war, however. Both economies may be slowing down, and the trade war is more than likely a response from the governments protecting their economies.
Four weeks ago, Freightwaves reported that a large trucking company, LME, abruptly shut their doors. LME was a shipper based in Minnesota, operating throughout the Midwest. LME had 30 shipping terminals with interline agreements across the US. LME had emerged from the structure of another failed shipper that closed its doors in 2016, having missed payments to workers.
Rising trucking rates had been starting to squeeze manufacturers, like P&G and many other household names.
The problem is widespread across the consumer landscape: Coca-Cola Co., PepsiCo Inc. and restaurant operaters such as Yum! Brands Inc. are also being affected, according to recent quarterly reports. It’s also spreading to rail, where freight costs are set to increase above the rate of inflation, according to Bloomberg Intelligence analyst Lee Klaskow.
Those companies were calling for stabilization of trucking costs, which may be occurring now. While truckload linehaul rates have risen steadily since the last recession, 2019 has begun to see a strong softening in the sector.
Source: Cass Information Systems
The manufacturers may be getting their wish on lower trucking rates, but not for the reasons they wanted. The US PMI is slumping sharply and indicates that purchasing managers are not bullish.
Source: Trading Economics
Trading Economics reports that US manufacturing growth is the slowest since the financial crisis.
The IHS Markit US Manufacturing PMI was revised slightly higher to 50.4 in July 2019 from a preliminary estimate of 50.0 and compared to June’s 50.6. Still, the latest reading indicated the slowest overall expansion in the manufacturing sector since the height of the financial crisis in September 2009.
What could be the source of the slowing demand for goods? Probably the slumping consumer who has more debt and less cash to work with that at any time since the last recession.
Bloomberg has a really nice visual on the slumping world economy with their Global PMI Tracker. I clipped a few screenshots here but I highly encourage you to review all of the data. It is clear that production expectations are trending down almost everywhere.