Retail sales key for tonnage in 2005

Retail sales key for tonnage in 2005

With tight inventories less an issue, consumers are key to tonnage growth

The latest batch of economic reports indicate that cash registers were ringing frequently during the holiday shopping season, and inventory stocks have been replenished to normal levels throughout the supply chain. Now that lean inventories, a stimulus for tonnage growth during the summer and fall, had become a less of an issue coming into 2005, carriers will be leaning more heavily on consumer spending to keep freight rolling, according to Chris Brady, president of Commercial Motor Vehicle Consulting (CMVC).

But with sales continuing an upward trend, the decelerating growth continues to be in the freight forecast, Brady said.

“Fleets are looking at ‘05 for continued growth in freight volumes but the rate would fall a bit,” Brady told Fleet Owner. “I expect that expanding capacity will still remain their concern at least through the first half of the year.”

Despite some retailers’ anecdotal reports of sluggish holiday sales, in December seasonally-adjusted retail sales excluding motor vehicle and parts increased 0.3%, according to the Census Bureau. However, it was the vehicle dealerships that scored the highest that month, as traditionally volatile auto and motor vehicle sales took a 4.3% swing upwards. That marked a rally from November’s 1% decline.

Total retail sales increased 1.2% in December, driven by the rebound in the auto market. Motor vehicles comprise the largest category of retail sales, accounting for about a quarter of total sales.

In November both inventories and sales expanded throughout the supply chain, although inventories grew at a faster rate, according to a separate report form the Census Bureau. Sales went up 0.4% ($975 billion), while inventories grew 1.0% ($1.27 trillion).

This is an indication that manufacturers, wholesalers and retailers were able to build up their inventories, which had been very lean through the summer and early fall, back to normal levels, Brady said.

“Depending on the industry, stocks are either at equilibrium or lean,” Brady explained. “But stocks will be replenished due to expanding sales, and that’s going to drive production.”

And with stocks at about normal levels, retailers are reordering to keep pace with sales growth, and no longer to build up stocks as had previously been the case during the summer.

Consumer prices deflated 0.1% in December, giving households a welcome break from months of steadily rising prices, most notably energy costs. The energy index took a 1.8% dive, marking its largest plunge since July. Excluding food and energy, inflation rose 0.2%.

The manufacturing sector was buzzing in December as production increased 0.7%, as activity heated up across most major industry groups, according to the Federal Reserve.

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