Signs of a strengthening US economic was evident throughout the first quarter of 2012 – including declines in unemployment, rising US consumer confidence and increasing manufacturing activity. As the US continues to improve, the rest of the world, in particular Asia and Europe are displaying worrisome economic trends. Although Asia’s manufacturing has recently picked up, it is still weak and is evident the region is undergoing an economic slowdown. Meanwhile, Europe may have succumbed to a mild recession as weak manufacturing reports indicate a second straight quarter of economic contraction. As a result of these global trends, many are now wondering if the US is emerging as a main engine for global growth. This may be the case but it’s still a bit premature as factors such as rising oil prices may hamper current and future economic improvements.
Even still, US manufacturing activity continues to increase. A bit concerning though is the recent March report, while still expanding, new orders and exports declined 0.4% and 5.5% respectively. This may be a result of global economic difficulties.
US port activity for the quarter was mixed. While imports continue to decline, exports increased during the quarter. The Port of Los Angeles continued to report record exports with February exports increasing 9.5%.
Airfreight, however, continues to be a concern. High oil prices appear to have resulted in shifts to less expensive modes of transportation for many shippers. Even though the Miami International Airport appears to be the exception, reporting positive tonnage for the first two months of the year, airports such as Chicago, Los Angeles have reported declines in tonnage for January.
Road transport continued to make good gains. Trucking and rail transport continue to note increases for the first two months of the year. After reporting a slight decline in activity for January, the American Trucking Association noted a 0.5% increase for February. The association cited improvements in manufacturing and the housing market as indicators for the improvement.Although US rail carloads are down 2.2% for the first twelve weeks of 2012, rail intermodal was up 2.4%. Canadian rail carloads were up almost 6% for the same period while rail intermodal was up 6.5%. Mexican rail carloads and intermodal were down 6% and up 3.6% respectively. Increasing shifts from air and trucking are benefiting intermodal as is the increasing use by the likes of UPS and FedEx.
The increase in oil prices will remain a concern for both shippers and transportation/logistics providers as fuel surcharges continue to rise and erode profits. Still, consumer confidence continues to improve and unemployment continues to decline. Retail sales appear to be improving, particularly for ecommerce. This has resulted in an increase in demand for warehousing/distribution center space for this particular retail segment. This will bode well in particular for small parcel providers such as FedEx, UPS and regional small parcel providers.