Fleetowner 2945 Freight1
Fleetowner 2945 Freight1
Fleetowner 2945 Freight1
Fleetowner 2945 Freight1
Fleetowner 2945 Freight1

Economic bellwethers that bode well for trucking

Aug. 6, 2012
Manufacturing and Construction looking up

Data recently compiled and analyzed by experts on key segments of economic activity paint a positive picture of a economic recovery now on an upward trend that will benefit trucking as the year progresses.

For starters, the Institute for Supply Management(ISM) stated that its latest Report On Business (Manufacturing) indicates economic activity in the manufacturing sector contracted in July for the second time since July 2009— but the overall economy grew in July for the 38th consecutive month.

Interestingly, according to ISM, in July new manufacturing orders and inventories were contracting while manufacturing production and employment were growing.

“The PMI [Purchasing Managers Index]registered 49.8%, an increase of 0.1 percentage point from June’s reading of 49.7%, indicating contraction in the manufacturing sector for the second consecutive month, following 34 consecutive months of [manufacturing] expansion,” explained Bradley J. Holcomb, chair of the ISMManufacturing Business Survey Committee.  

“The New Orders Index registered 48%, an increase of 0.2 percentage point from June and indicating contraction in new orders for the second consecutive month, but at a slightly slower rate,” he continued,

“Both the Production Index and the Employment Index remained in growth territory, registering 51.3%and 52%, respectively,” Holcomb advised. “The Prices Index for raw materials registered 39.5%, an increase of 2.5 percentage points from the June reading of 37%, indicating lower prices on average for the third consecutive month.

Holcomb noted that ofthe 18 manufacturing industriessurveyed, seven reportedgrowth in July in the following order: Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Primary Metals; Petroleum & Coal Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; and Furniture & Related Products.

He said the11 industries reporting contraction in July, listed in order, were: Nonmetallic Mineral Products; Apparel, Leather & Allied Products; Wood Products; Textile Mills; Miscellaneous Manufacturing; Chemical Products; Transportation Equipment; Printing & Related Support Activities; Paper Products; Machinery; and Computer & Electronic Products.

Turning to another pillar of trucking activity, constructionspending in June climbed to a 2-1/2 year high as double-digit percentage increases in private residential and nonresidential construction “more than offset” an ongoing downturn in public construction, according to an analysis of new federal data by the Associated General Contractors of America (AGC) trade group.

“The June [construction] spending gains come on top of upward revisions to May and April totals, reinforcing the notion that private construction is now growing consistently,” explained Ken Simonson, AGC’s chief economist. “Even more encouraging, the improvement is showing up in a wide range of residential and nonresidential categories.”

Simonson pointed out that total construction spending gained 0.4% in June and an impressive 7.0% year-over-year. He said private nonresidential spending rose for the fourth consecutive month and was 14% higher than it was in June 2011.

Residential construction increased 1.3% in June and a whopping 12% year-over-year, according to Simonson. He said this growth was driven by “new multifamily construction soaring 3.4% percent and 49%, respectively, and single-family homebuilding going up 3.0% and 19%.”

Simonson noted that “five of the eleven private nonresidential categories in the U.S. Census Bureau’s monthly report registered double-digit percentage gains in spending from June 2011 to June 2012: power and energy construction (including oil and gas-related projects), 26%; hotels, 26%; manufacturing and educational, 19% apiece; and transportation (mainly trucking and rail facilities), 17%. There were also 7% year-over-year increases in health care, commercial (retail, warehouse and farm) and office construction.”

On the other hand, he said public construction spending “appears to have stabilized in recent months but the June 2012 total was 3.7% less than a year earlier. He added that only two of the Census Bureau’s 13 public categories posted year-over-year increases.

“Private nonresidential and multifamily construction should continue to grow in the second half of 2012 and beyond,” Simonson predicted.

“Single-family homebuilding also should top last year’s figures, although progress may not occur every month,” he continued.

“As a result,” Simonson summed up, “total construction spending in 2012 will be positive for the year for the first time since 2007-- even though public construction will remain in the doldrums.”

Despite the upswing in construction spending this year, AGC CEO Stephen E. Sandherr did point out that the association remains concerned that “construction growth will remain unbalanced, however, unless lawmakers enact more funding for essential water, wastewater and other infrastructure projects.”

More good news for trucking—and the U.S. economy by extension-- comes by way of the Summer Trucking Report just released by Ogden, UT-based TAB Bank. The bank stated that its study of the current state of trucking “shows broad signs of growth according to monthly truck tonnage, fuel costs, perceived business conditions, and invoice size. Historically,” TAB Bank noted, “trends in trucking and transportation serve as good indicators of the greater economy.”

Key positives for trucking highlighted by the bank’s report include:

·         Price of diesel fuel has dropped from about $4.15/gal to about $4.00 from March to May 2012

·         Monthly truck tonnage has increased 6.2% from March to April and 6.8% over April 2011

·         Business conditions have improved in all categories, based on six questions that include data like recent freight rates,  fleet size and number of employees

·         TAB's Core 25 Index increased revenue 13.7% between January and May 2012

·         Collections of unpaid invoices for TAB's Core 25 improved from 29.7 days to 28.9 days.

"Overall, we're seeing the trucking industry trending up, where overall business conditions are improving, business owners are feeling increasingly optimistic, and TAB Bank is funding more receivables than we have over the past 12 to 18 months, noted Eric Myers, TAB Bank vice president of marketing.

“This is great news for the overall U.S. economy,” he added, “because as trucks transport more products, it represents a leading indicator of greater demand."
 

Sponsored Recommendations

Tackling the Tech Shortage: Lessons in Recruiting Talent and Reducing Turnover

Discover innovative strategies for recruiting and retaining tech talent in the trucking industry at our April 16th webinar, where experts will share insights on competitive pay...

Stop Sweating Temperature Excursions

Advanced chemical indicators give you the peace of mind that comes from reliable insights into your supply chains. Compromised shipments can be identified the moment they arrive...

Stop Sweating Temperature Excursions

Advanced chemical indicators give you the peace of mind that comes from reliable insights into your supply chains. Compromised shipments can be identified the moment they arrive...

How Electric Vehicles Help You Prolong the Life of Your Fleet

Before adopting electric vehicles for commercial/government fleets, prioritize cost inquiries. Maintenance is essential; understand the upkeep of EV fleets. Here’s what you need...

Voice your opinion!

To join the conversation, and become an exclusive member of FleetOwner, create an account today!