North American freight volumes down despite record online sales

Shipment volumes and expenditures both continued their decline in December, falling 4.9 and 2.7 percent, respectively, according to the latest Cass Freight Index Report.    North American shipment volumes and expenditures continue to decline in December 2015, falling 4.9 and 2.7 percent, respectively, compared with the previous month, according to the latest Cass Freight Index Report.
   Although the declines are not unusual for December, the logistics payment solutions provider said they capped off a second quarter of decline and are still well below 2014 levels.
   “In retrospect, 2015 did not even begin to reach the heights we reached in 2014,” said Cass. “By the end of 2015, both shipment volume and expenditures fell back to 2013 levels.”
   Compared with 2014, shipment volume were down 3.7 percent freight in December while transportation expenditures fell 5.2 percent from last year.
   “Holiday season retail store sales were strong, but did not meet expectations in 2015,” said Cass. “Online sales blew past last year’s record and more than made up for lower brick and mortar sales. The discounting started early again this year, muddying Black Friday sales figures, and consumers waited until goods were marked down further before buying.
   “The holiday season was especially a boon for small parcel carriers,” it added.
   Year-over-year, overall shipment volumes dropped were down 5.13 percent in November after a 5.3 percent decrease in October and a 1.5 percent decline in September.
   Commenting on the closing of the 2015 year, Cass said, “Despite favorable employment/unemployment reports and moderate growth in household wealth and income, consumers are still very conservative. There was little expansion in credit and higher savings rates. In general, consumer sentiments have remained in the 90s most of the year, but trailed downward in the third and fourth quarter.
   “Companies are laying off seasonal workers and many are even going beyond that. Macy’s just announced a downsizing that will affect close to 5,000 employees and will see the closing of some of their flagship stores. Expect unemployment to rise again in the first quarter of 2016.
   Cass said that high inventory levels remain problematic for retailers, wholesalers and manufacturers and have cause them to offer discounts on a majority of goods during the holiday season.
   “The Federal Reserve raised interest rates in December, which puts more pressure on firms holding inventory,” it added. “Inventory carrying costs rise with interest rates, and the money tied up in inventory that is not moving becomes a liability. And this may get worse, as the Fed has discussed plans to raise rates several times in the coming year. Low warehouse vacancy rates are pushing the price of warehouse space. In short, the nation’s bloated inventories are becoming a problem.”
   Cass also noted the effects of a surging U.S. dollar against other currencies around the world.
   “Export demand was way off in 2015 because of global economic conditions and the relative strength of the U.S. dollar, which makes our goods more expensive. Global conditions are slowly stabilizing, so expect a strengthening in U.S. exports, excluding oil, in 2016. However, the U.S. dollar shows little sign of falling off in the near term.”
   The crude oil industry, as well as the shipping companies that move the highly volatile commodity, has been hit hard in 2015 by plummeting prices cause by global oversupply.
   “This has resulted in a significant drop in fuel and drilling supplies carried by railroads and trucks that were involved in moving pipes, sand, water and waste for fracking mines,” said Cass. “The low price of natural gas has further exacerbated the problem as more electric plants convert to natural gas. Railroads and barges have seen their coal shipments erode, and several mines have closed because of a lack of demand. Energy markets will remain a wildcard in 2016.”
   The Cass Freight Index is based on domestic freight shipments of hundreds of the company’s clients across a wide variety of industries. Cass Information Systems processes more than $26 billion in annual freight payables.