Manufacturing continues to drive tonnage

Manufacturing continues to drive tonnage

Manufacturing, business sector advanced tonnage in December and January

The manufacturing sector, trucking’s biggest customer, continued its expansion in December and January.

Manufacturing output advanced 0.4% in January after a 0.3% bump in December, the Federal Reserve said. Business equipment remained hot as output advanced 1.1%. However, the output of consumer goods receded 0.4% in January as factories toned down production of light trucks, appliances, furniture and carpeting, the Federal Reserve said.

In a separate report, the Census Bureau said trade sales and manufacturers’ shipments—a broad measure of the supply chain— expanded 1% in December. This marks a healthy 10.6% jump over the same period last year. Manufacturers’ and trade inventories increased a more modest 0.2%, which indicates the supply chain was somewhat lean at year’s end.

New orders for manufactured durable goods dampened the picture, however, decreasing 0.9% or to $200.4 billion in January, the Census Bureau said. But this didn’t wipe out the 1.4% surge posted in December. Manufacturers’ backlogs increased, if at a slower rate of 0.2%, or $900 million. Inventories expanded another 0.9% or $2.6 billion, following a more modest 0.2% increase the month before.

The January hedge in durable goods orders isn’t a major concern, according to analyst Chris Brady, president of Commercial Motor Vehicle Consulting, who pointed out that excluding the normally volatile transportation segment, new orders actually advanced 0.8%.

“I wouldn’t expect a huge drop off [in manufacturing] due to business investments,” Brady told Fleet Owner. Brady expects business spending to continue to provide a reliable boost to manufacturing and freight volumes.

“Businesses have to consider two things,” Brady explained. “One, they have to replace older equipment and secondly, they have to expand capacity to meet higher sales volumes. These factors will drive investments in ’05.”

On the consumer side, inflation advanced 0.1% in January as falling energy prices offset across-the-board increases, the Bureau of Labor Statistics said.

“Inflation was a downside, but the labor market is gradually improving,” noted Brady. “Because of this there will be no major boom or drop off for consumers.”

Equipment and software spending (business investments) account for just under one-tenth of the U.S. economy, while consumer spending comprises nearly three-fourths. And with a manufacturing sector strengthening, business investments continuing to expand, and a growing labor market (if at an anemic rate), tonnage continues to look healthy through the first half of 2005.

“I would say as the year goes along manufacturing growth will gradually moderate, but there is still momentum in the pipeline,” Brady said. “The first quarter will be better than second in terms of growth. But growth will keep capacity in the linehaul segment relatively tight through the first half of the year, which makes for a good environment to increase rates and keep utilization of equipment high.”

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