Fitch forecasts modest holiday freight increase

Fitch Ratings expects consumer spending to grow at a modest but still healthy pace this holiday season, basing its expectations in large part on the publicly announced package volume preparations being made by United Parcel Service and FedEx

Fitch Ratings expects consumer spending to grow at a modest but still healthy pace this holiday season, basing its expectations in large part on the publicly announced package volume preparations being made by United Parcel Service and FedEx.

The firm also believes the continuing shift to online purchases, in addition to lean retailer inventories, should help support solid fourth quarter package volume growth.

Fitch pointed to UPS’s plans to hire 55,000 seasonal employees in the U.S. to handle heavy holiday package volumes as one indication of strength in projected demand for consumer items shipped during the critical last two weeks before Christmas. UPS sees total global shipment volumes growing by over 6% during the peak period, Fitch added.

This parallels recent indications from FedEx that projected shipment volumes between Thanksgiving and Christmas could increase 12% over 2010.

FedEx and UPS have both noted the uncertain global economic outlook and signs of a significant weakening in global trade volumes during the third quarter, yet their holiday volume forecasts suggest no rapid near-term deterioration in consumer spending patterns, Fitch noted.

While these early package volume forecasts provide support for the view that U.S. consumer spending remains relatively healthy, Fitch cautioned that the continuing shift in consumer preferences for online purchasing and last-minute delivery may overstate the importance of these forecasts relative to brick-and-mortar retail spending.

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