Surprise, Surprise… the Manufacturing Sector Remains Choppy

By Jeremy West, Internet Truckstop Economist

Over the past few months, it has seemed like U.S. manufacturers are treading water. Factory output isn’t dramatically sinking, as occurs whenever the economy is entering a recession. But, on the other hand, we’re not seeing any production gains worth cheering about either.

Manufacturing Orders and Production

Two basic metrics are tracked for manufacturing output: the quantity of current production and the volume of orders for future production. Last Thursday, the Census Bureau reported that new orders in August for factory production fell 5.2% month-over-month and 2.5% year-over-year. This was the first year-over-year decline in new orders since November 2009.

Much of this decline resulted from a 101.8% drop in orders for commercial aircraft. As shown in the figure, orders excluding transportation equipment increased by 0.28% YOY. Regardless, the message is clear: manufacturing production is stalling.

Separately, the Institute for Supply Management reported that the Purchasing Managers’ Index (PMI) increased to 51.5 during September. This was positive news: any value above 50 indicates manufacturing growth, and the index has been below 50 since May. The next few months will show whether this represents a temporary spike in manufacturing activity or a reversal of the contraction seen in the manufacturing sector during 2012Q2.

So, the production picture isn’t entirely gloomy, and some regions of the country are performing better than others. During September, manufacturing output improved in Texas and in the Central Atlantic regions, worsened in New York and in much of the Midwest, and remained largely flat in the Philadelphia region.

Taken together, these reports offer a mixed outlook for total manufacturing—and, subsequently, trucking—with aggregate production activity trending to the downside. The next Federal Reserve Industrial Production and Manufacturing report is scheduled for October 16th. Don’t be surprised to find that factories continued to slowly churn.

Market Demand Index (MDI) Decreases 2%

FOR IMMEDIATE RELEASE

NEW PLYMOUTH, ID (September 25, 2012) – Internet Truckstop, the largest web-based freight matching service in the transportation industry reports that the Market Demand Index (MDI) decreased 2% to 11.64 from 11.83 the previous week as reported in the weekly Trans4Cast.

The overall average equipment rate decreased 2% to $2.04 from $2.09 the previous week. Flatbed rates decreased 3% to $1.90 from $1.96 the previous week. Reefer rates decreased 3% to $2.08 from $2.16 the previous week. Specialized truck rates increased 2% to $2.45 from $2.41 the previous week. Van rates decreased 5% to $1.72 from $1.82 the previous week.

“With an upcoming national election, a looming “fiscal cliff,” and continuing instability in the Eurozone, the economic climate is quite unclear. And, the outlook will remain murky until businesses and consumers can better determine the political environment in which they must operate.” Jeremy West, Internet Truckstop Economist

About Trans4Cast powered by Internet Truckstop
Trans4Cast
is the compilation of highly relevant data, easily accessible to all trucking professionals. The Market Demand Index (MDI), a measure of relative truck demand, is culled from Internet Truckstop data.  Internet Truckstop compiles this weekly report that will assist in making critical business decisions. The report is now a web series with a news anchor and appears as the Industry Economic Update  on BigTruckTV.com, Internet Truckstop, and Truckload Carriers Association. The show is produced bi-weekly and can be accessed online 24/7. Jeremy West is the economic consultant preparing this report. He holds a bachelor of science in Economics, with minor degrees in Business and Creative Studies, from Texas A&M University, where he is currently completing a doctorate in Economics. For more information on Trans4Cast, please contact Roxanne Bullard at 1-800-203-2540 ext. 6230.

How Much is Policy Uncertainty Hindering the Economy?

By Jeremy West, Internet Truckstop Economist

Consider the following situation:

You operate a small carrier and are considering adding a few trucks to your fleet. There is a (hypothetical) politician who is campaigning for a U.S. Senate seat on a platform of further expanding the FMCSA regulations to require any commercial truck that crosses state lines to have two drivers in the cab with combined driving experience of at least twenty years. (You may think this hypothetical rule sounds ridiculous, but some opinions of the current CSA regulations indicate that such a proposal would not be that big of a leap). Suppose that this politician has a sizeable chance of winning his campaign. Are you going to buy any new trucks today, or wait (at least) until after the November election?

The above situation illustrates the role of “policy uncertainty” in shaping economic decisions. In this case, whether or not you invest in expanding your fleet will be partly determined by the outcome of the upcoming election. As a result of this uncertainty, you forgo making the decision until after the election outcome is known.

It isn’t just elections that create policy uncertainty. As was mentioned in a post to the Industry Economic Update LinkedIn group, this practice of delaying investment decisions is currently widespread in the economy. In a recent article on political uncertainty, the Washington Times notes, “[if] there’s one thing investors and employers hate, it’s not knowing what lies ahead.”

Two groups of academic researchers have attempted to quantify the effect of policy uncertainty on the economy. In their article, “Measuring Economic Policy Uncertainty” (pdf), Scott R. Baker, Nicholas Bloom, and Steven J. Davis link several measures of political uncertainty (such as the frequency of media references to policy uncertainty) to declines in real GDP, private investment, and aggregate employment. Separately, Sylvain Leduc and Zheng Liu find that uncertainty about future economic conditions is substantially responsible for the sluggish economic recovery that has followed the recession.

With an upcoming national election, a looming “fiscal cliff,” and continuing instability in the Eurozone, the economic climate is quite unclear. The outlook will remain murky until businesses and consumers can better determine the political environment in which they must operate.

Press Release – Tran4Cast Powered by Internet Truckstop Market Demand Index (MDI) Decreases 10%

Tran4Cast Powered by Internet Truckstop Market Demand Index (MDI) Decreases 10%

NEW PLYMOUTH, Idaho, September 18, 2012– Internet Truckstop, the largest web-based freight matching service in the transportation industry reports that the Market Demand Index (MDI) decreased 10% to 11.83 from 13.2 the previous week as reported in the weekly Trans4Cast.

The overall average equipment rate decreased 3% to $2.09 from $2.16 the previous week. Flatbed rates decreased 1% to $1.96 from $1.98 the previous week. Reefer rates decreased 6% to $2.16 from $2.30 the previous week. Specialized truck rates decreased 3% to $2.41 from $2.49 the previous week. Van rates decreased 2% to $1.82 from $1.86 the previous week.

“The economic climate remains tumultuous for trucking. On Friday, the Census Bureau reported that August retail sales increased nearly 1% from July, while the Federal Reserve reported that manufacturing activity shed 0.7% over the same period. Trucking activity should be seasonally strong through November, but broader instability continues to temper volumes and rates.”
Jeremy West, Internet Truckstop Economist

About Internet Truckstop
Founded in 1995, Internet Truckstop is the first and largest freight matching service on the web. Internet Truckstop offers more tools than any other freight matching service available. These easy-to-use tools, the largest freight database, and a commitment to the transportation industry make Internet Truckstop the leader in Internet freight matching.

About Trans4Cast powered by Internet Truckstop

Trans4Cast is the compilation of highly relevant data, easily accessible to all trucking professionals. The Market Demand Index (MDI), a measure of relative truck demand, is culled from Internet Truckstop data. Internet Truckstop compiles this weekly report that will assist in making critical business decisions. The report is now a web series with a news anchor and appears as the Industry Economic Update on BigTruckTV.com, Internet Truckstop, and Truckload Carriers Association. The show is produced bi-weekly and can be accessed online 24/7. Jeremy West is the economic consultant preparing this report. He holds a bachelor of science in Economics, with minor degrees in Business and Creative Studies, from Texas A&M University, where he is currently completing a doctorate in Economics. For more information on Trans4Cast, please contact Roxanne Bullard at 1-800-203-2540 ext. 6230.

Press Release: 75K and 100K Diamond Broker Bond Program Now Available

FOR IMMEDIATE RELEASE:

ITS Financial Services, LLC launches 75K and 100K bond program for its Diamond Broker members

New Plymouth, ID; Schaumburg, IL; Portland, OR – September 12, 2012 – ITS Financial Services, LLC announces the addition of a high quality, higher limit surety bond as part of its Diamond Broker program. The offering is in response to the newly enacted Highway Reauthorization Bill mandating the higher bond limit for all Brokerages and Freight Forwarders next July.

Through a continuing partnership with Roanoke Underwriting, a division of Roanoke Insurance Group, Inc. and McGriff, Seibels and Williams, Inc., the program will allow members to meet the new requirement at a manageable price. The program provides for a 75K and a 100K option. Initial set up cost are below $6,600 and $8,600 respectively for the first year. Annual premium and fees are below $2,900 and $3,700 in future years. The program does not require the maintenance of collateral which addresses a major industry concern particularly for smaller to mid-sized firms.  In addition, Internet Truckstop can advertise the size of the bond, as well as, the current status of the bond to the nearly 800,000 trucks using truckstop.com.

We are pleased to be able to provide this option in such a tight credit environment.  The costs are manageable and it does not require our members to tie up assets as collateral.  Assets which would otherwise be used in growing their businesses.  I believe this program will be a real benefit to many of our members who consistently meet and exceed industry standards.” says Joe Foxall, CFO-ITS Financial Services, LLC

Diamond Broker Program / Availability
Members of Internet Truckstop who maintain an “A” experience factor with Internet Truckstop and meet certain credit and performance criteria are eligible to participate in the Diamond Broker program.  At present membership includes over 1,200 quality Brokers. Members have access to surety bonds underwritten by the American Alternative Insurance Corporation (AAIC).  AAIC has an A.M. Best rating of A+ (Superior) which is the highest industry rating.

About Roanoke Insurance Group, Inc.
Roanoke Insurance Group, Inc. specializes in bonds and in 2010 celebrated its 75th year servicing this market. Unlike many other underwriters, bonds are the focus of their business. By partnering with Roanoke Underwriting a high level of experience, knowledge and stability can be delivered to our customers. Aside from price and value, what is particularly unique about this product is the simplified purchase process.

“Roanoke Underwriting, working with ITS Financial Services and McGriff, Seibels & Williams of Oregon, is pleased to provide a bond program for ITS customers.  We have been working with our underwriters in advance of the legislation to develop an affordable bond program for all credit worthy ITS members.  Our program is underwriter approved and is available in advance of the deadline to file a $75,000 bond set for summer 2013,” says Colleen Clarke, Vice President, Surety, Roanoke Underwriting.

The Partners Roles
ITS Financial Services is an affiliate of Internet Truckstop and manages the Diamond Broker program. McGriff, Seibels & Williams, Inc. serves as the licensed agent for the bond. Roanoke Underwriting serves as the managing underwriter for the bond. This relationship allows ITS Financial to report the current status of the bond at all times. Should a claim occur, the proven resources of ITS Financial and Internet Truckstop can be utilized to help successfully resolve the claim.  At the same time, the fact that a bond is free of claims can be advertised to Carriers which is unique in the industry.

For more information on this product contact ITS Financial at
1-866-812-9675 x 6080

Press Release – Trand4Cast Powered by Internet Truckstop Market Demand Index (MDI) Increases 2%

New Plymouth, Idaho, September 11, 2012–Internet Truckstop, the largest web-based freight matching service in the transportation industry reports that the Market Demand Index (MDI) increased 2% to 13.2 from 12.96 the previous week as reported in the weekly Trans4Cast.

The overall average equipment rate decreased 1% to $2.16 from $2.17 the previous week. Flatbed rates decreased 2% to $1.98 from $2.01 the previous week. Reefer rates increased 4% to $2.30 from $2.21 the previous week. Specialized truck rates decreased 2% to $2.49 from $2.54 the previous week. Van rates decreased 3% to $1.86 from $1.92 the previous week.

One of the more disappointing economic reports last week was that the Institute for Supply Management’s proprietary PMI for manufacturing remained below 50 in August for the third consecutive month. The PMI is a composite measure of several dimensions of the supply chain, and any value below 50 reflects a contraction in U.S. manufacturing activity.

About Trans4Cast powered by Internet Truckstop
Trans4Cast
is the compilation of highly relevant data, easily accessible to all trucking professionals. The Market Demand Index (MDI), a measure of relative truck demand, is culled from Internet Truckstop data.  Internet Truckstop compiles this weekly report that will assist in making critical business decisions. The report is now a web series with a news anchor and appears as the Industry Economic Update  on BigTruckTV.com, Internet Truckstop, and Truckload Carriers Association. The show is produced bi-weekly and can be accessed online 24/7. Jeremy West is the economic consultant preparing this report. He holds a bachelor of science in Economics, with minor degrees in Business and Creative Studies, from Texas A&M University, where he is currently completing a doctorate in Economics. For more information on Trans4Cast, please contact Roxanne Bullard at 1-800-203-2540 ext. 6230.

About Internet Truckstop
Founded in 1995, Internet Truckstop is the first and largest freight matching service on the web. Internet Truckstop offers more tools than any other freight matching service available. These easy-to-use tools, the largest freight database, and a commitment to the transportation industry make Internet Truckstop the leader in Internet freight matching.

Source:
Stephanie Sternes
800-203-2540 ext. 6186
stephanies@truckstop.com

Is manufacturing activity weakening? Comparing the Industrial Production Index to the PMI

One of the more disappointing economic reports last week was that the Institute for Supply Management’s proprietary PMI for manufacturing remained below 50 in August for the third consecutive month. The PMI is a composite measure of several dimensions of the supply chain, and any value below 50 reflects a contraction in U.S. manufacturing activity.

In contrast, the Manufacturing component of the Federal Reserve’s Industrial Production (IP) Index increased moderately during both June and July (the August values will be released this week on September 14th). The divergence of these two indices presents a conundrum: how can manufacturing be simultaneously increasing and decreasing?

The discrepancy primarily results from differences in the method by which each of these indices is constructed. The Federal Reserve determines monthly IP Manufacturing strictly by examining (actual and imputed) industrial output, sourced from various trade associations and censuses.

By comparison, the PMI is formed from surveys of ISM member businesses and reflects five components: new orders, production, employment, supplier deliveries, and inventories. Because it includes several components besides production, the PMI may contract even if current manufacturing volumes are increasing.

So, which of these two indices is superior? Or, more specifically, which index better contextualizes the environment for trucking? Although some analysts argue the PMI has inferior predictive power (e.g. Bachman, 2010), this relates more to its usefulness for forecasting economic recessions than its quality in measuring the current business climate.

Overall, both measures are valuable for carriers to use in evaluating their future outlook. The Industrial Production Index is informative about future volumes, especially over a longer term—goods that are produced are eventually going to be shipped, generating demand for trucks. The PMI speaks to the current manufacturing climate, and declines in the non-output portions of the PMI could foreshadow production declines to come.

 

Jeremy West, Internet Truckstop Economist

 

 

Introducing the New and Approved ITS Mobile App Stop

Today our world is reliant  on technology. Smart phones and tablets have become an essential tool for day to day business. Mobile applications that range from games to business productivity, power these devices.

Smart phones and Tablets provide “stores” for a user to purchase and download these Mobile applications. At times, it can be cumbersome to search through these stores to find applications that are relative to your business needs. Internet Truckstop LLC is proud to announce ITS MOBILE APP STOP®.

ITS Mobile App Stop is a centralized location for mobile apps geared towards the transportation industry. Time is valuable, go to ITS Mobile APP STOP and find your transportation application today!

Press Release: Trans4Cast Powered by Internet Truckstop Market Demand Index (MDI) Increases 7%

New Plymouth, Idaho September 5, 2012–Internet Truckstop, the largest web-based freight matching service in the transportation industry reports that the Market Demand Index (MDI) increased 7% to 12.96 from 12.14 the previous week as reported in the weekly Trans4Cast.

The overall average equipment rate increased 4% to $2.17 from $2.10 the previous week. Flatbed rates remained unchanged at $2.01 from the previous week. Reefer rates increased 3% to $2.21 from $2.14 the previous week. Specialized truck rates increased 4% to $2.54 from $2.45 the previous week. Van rates increased 7% to $1.92 from $1.79 the previous week.

“The flat-line trend for trucking metrics broke this week, with volumes and rates moving significantly to the upside. This improvement in loads is partly seasonal, but is also attributable to a mildly improving economic climate. However, the overall economic outlook for trucking remains relatively weak, supporting expectations of moderate but unimpressive growth for the sector across the second half of 2012.” Jeremy West, Internet Truckstop Economist

About Trans4Cast powered by Internet Truckstop
Trans4Cast
is the compilation of highly relevant data, easily accessible to all trucking professionals. The Market Demand Index (MDI), a measure of relative truck demand, is culled from Internet Truckstop data. Internet Truckstop compiles this weekly report that will assist in making critical business decisions. The report is now a web series with a news anchor and appears as the Industry Economic Update  on BigTruckTV.com, Internet Truckstop, and Truckload Carriers Association. The show is produced bi-weekly and can be accessed online 24/7. Jeremy West is the economic consultant preparing this report. He holds a bachelor of science in Economics, with minor degrees in Business and Creative Studies, from Texas A&M University, where he is currently completing a doctorate in Economics. For more information on Trans4Cast, please contact Roxanne Bullard at 1-800-203-2540 ext. 6230.

About Internet Truckstop
Founded in 1995, Internet Truckstop is the first and largest freight matching service on the web. Internet Truckstop offers more tools than any other freight matching service available. These easy-to-use tools, the largest freight database, and a commitment to the transportation industry make Internet Truckstop the leader in Internet freight matching.

Source:
Stephanie Sternes
800-203-2540 ext. 6186
stephanies@truckstop.com