The manufacturing sector grew in December, indicating that the sector has some momentum left going into this year. Retailers were generally reporting lukewarm sales growth during the holiday shopping season.
Although the economy is generally trending to decelerating growth, there is one sector in trucking that has seen a boost over the holidays: package delivery companies.
“The continual increase of shopping on the Internet has changed seasonal freight patterns,” Chris Brady, president of Commercial Motor Vehicle Consulting (CMVC) told FleetOwner. “When you purchase goods on the Internet that you normally would’ve purchased at retail outlets, that dampens shipments from distribution centers to retail outlets. It’s a stimulus to the UPS’s and FedEx’s who do home delivery.”
Additionally, the expansion of e-commerce has grown the ranks of last-minute shoppers, observed a FedEx executive during a conference call to investors for its most recent quarter.
“I think one of the things we are seeing in spending a lot of time with our peak season shippers is actually the peak is a bit delayed relative to what we have been seeing historically,” said Mike Glenn, president of FedEx Services. “As more business moves to the Internet, consumers tend to procrastinate a bit more. So on the Express side of the business, we tend to see a bit weaker peak and then much stronger as we move toward Christmas, not as significant as it relates to the other segments.”
“The second thing that’s impacting seasonality is gift cards,” said CMVC’s Chris Brady. “That means products are being purchased after Christmas, rather than before. You’re not getting that surge in freight before the holidays. You don’t see that falloff afterward either because goods are still moving from the distribution center to the retail outlets. These changes in consumer purchasing are impacting freight patterns.”
The extent to which gift cards has impacted freight patterns may be apparent as carriers disclose year-over-year January freight volumes, Brady noted.
The Institute for Supply Management reported its manufacturing index was 51.4 in December, with any score higher than 50 indicating growth. In November, the manufacturing sector contracted as shown by a score of 49.5.
“I think manufacturing is going through its rough patch,” Brady said. “General inventories were a bit high in the fourth quarter. The inventory-to-sales ratio has been trending upward a bit and that would affect the manufacturing side and were seeing the slowdown in manufacturing due to that.”
However, there is little evidence to suggest that consumer spending will decline. This lends credence to the prediction that manufacturing will rebound slightly as retailers work through their excess inventories.
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