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March shipment volume increased 6.6 percent over the prior month, on top of the 7.3 percent rise seen in February. The number of shipments was 0.4 percent higher than last March and 4.6 percent higher than in March of 2012. Railroad carloads rose fairly steadily throughout March, up over 5 percent, while intermodal loadings increased over 3 percent. Truck traffic has also been picking up after falling for the first two months of the year. The Institute for Supply Management’s PMI edged up another 0.5 percentage point in March to 53.7 (anything below 50 indicates that the industrial economy is contracting). Many of those surveyed indicated that demand was strong, but they still had concerns about weather‐related problems in many areas of the country.
Industry analysts had expected manufacturing activity to expand more, but there were many positives in the data. Production has finally turned the corner and is no longer contracting. In fact, it rose almost 16 percent in March. This is the largest month‐to‐month increase since July 2009. New orders, a bellwether of future freight, rose again in March, up 1.1 percent, after plunging dramatically just two months ago. The backlog of orders jumped 10.6 percent, another indicator that freight volumes should be growing in coming months. Freight volumes in the first quarter were up over 10 percent over Q4 2013, showing the strongest start of the last few years, but it remains to be seen whether the number of shipments will follow the trends of recent years and falter in the second quarter.
March Freight Expenditures
Freight expenditures rose for the second month in a row, rising 5.4 percent over February. Expenditures rose at a slower rate than volumes, indicating that most of the increase can be attributed to the change in volume. This is the second highest point the payments index has reached in four years, and 5.3 percent higher than in the same month in 2013. Freight spending was up 6.8 percent in the first quarter of 2013 compared to the previous quarter.
Manufacturing and production have turned a corner and are back in expansion mode. Strong new orders and backlog figures bode well for the freight sector. Imports were up in February, especially for autos and parts.
Sales of cars and pickup trucks – which are considered a harbinger of recovery in the construction sector – rose sharply in March. New housing starts actually fell for the first two months of 2014, but permits were up 5 percent. January and February are traditionally low because of the weather, and this year’s weather has been especially severe. Rising home prices and interest rates will likely have a dampening effect going forward. The weather affected consumer spending during the first quarter as well, so expect to see recovery as consumers spend more because of pent up demand. The labor picture appears to be strengthening on the surface, with 192,000 jobs added last month, but Gallup’s measure of the percentage of the adult population that is employed full time (at least 30 hours a week) dropped to 42.7 percent, just slightly above the low point in February 2011.
Gallup also puts the seasonally adjusted unemployment rate at 7.5 percent, compared to the Bureau of Labor Statistics’ (BLS) 6.7 percent (the Gallup figure includes the so‐called discouraged workers that fall off the BLS rolls.) Private‐sector payrolls are now higher than in December 2007, the start of the Great Recession.
All in all, lots of strengthening in the economy, but taking everything into consideration the signals are still mixed. It will be interesting to see if we can continue to climb up or if we will keep with the trend of recent years and stumble in the second quarter.
Source: Cass information Systems
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