Holiday Shopping Upbeat for Tonnage

Holiday Shopping Upbeat for Tonnage

2005 tonnage positive after strong holiday sales in November

The first half of the holiday shopping season appears to have built up momentum to support a strong freight volume going into next year.

Freight volumes through the first quarter of 2005 are expected to continue to grow at a decelerating rate. That’s because retail sales excluding autos reported strong growth in November, and stocks throughout the supply chain tightened in October.

Excluding motor vehicles and parts, retail and food service sales posted a 0.5% growth to reach $266 billion in November, according to the Census Bureau. Including auto sales, which are typically volatile, drags the total retail sales growth down to a more modest 0.1%. Motor vehicle and parts dealer sales, which comprise over a fifth of total retail sales, were weak after a 1.3% decline.

Another report indicates that sales growth in the manufacturing, retailer and wholesaler-levels are outpacing inventory growth. In October distributive trade sales and manufacturers’ shipments expanded 1.2% to $968.7 billion, while inventories grew only 0.2% to $1.26 trillion.

When sales growth accelerates faster than inventories, it indicates lean inventories, explained analyst Chris Brady, president of Commercial Motor Vehicle Consulting (CMVC). This implies that there will be a more fluid “pass through” of orders through the supply chain as lean inventories prompt retailers to reorder nearly at the same rate as customers purchase items.

“Right now these reports definitely imply that holiday sales will meet retailers’ expectations, which reduces the risk of bloated inventories back at distribution centers,” said Brady. “The only concern is that a lot of people do most of their shopping in the last [holiday shopping] week. If those sales turn out to be weaker than expected that could be a problem. However, the current data doesn’t indicate that scenario.”

November’s retail sales growth indicates that consumers shrugged off dogging inflationary pressures spurred on by recent hikes in energy prices. Consumer inflation was relatively tame as it rose 0.2% in November, the Bureau of Labor Statistics said today. Energy had recently been the driving factor behind inflation, as October’s 4.2% spike in the energy index led to a hefty overall 0.6% inflationary increase.

Industrial production in November went up 0.6%, according to the Federal Reserve. Industrial production measures the output from manufacturing, mining and utilities—with manufacturing accounting for roughly 85% of the total output, said Brady.

“This implies that retailers are ordering back to manufacturers, and the manufacturers have ramped up production as a result,” Brady said.

“There’s almost no disruption to commodities from wholesalers to retailers,” Brady pointed out. “For example, in a situation where there’s excess stocks at a distribution center, when a retailer sells a commodity you wouldn’t get a flow. Because when retailers don’t reorder because they are trying to reduce stock, it disrupts that flow. That’s not happening right now.”

TAGS: Operations
Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.