The Dow Jones U.S. Trucking Index (DJUSTK) has been flirting with all time highs, reflecting investor optimism in the US trucking industry and broader economy. The all-time closing high was 776.07 (set last Wednesday) and on Monday the index closed at 771.07, just five points short of the record. Yes, things are booming in the trucking industry, and according to Dow Theory, that’s good news for everyone. In fact, the Dow just notched the highest number of record closes in a year.
Historically, trucking is a leading indicator for the economy. Between a strong labor force, a boost from the passage of the tax plan, encouraging signs of profitability from ELDs, and a consolidation of retail, things are coming together, all pointing to a strong and sustained first half of 2018 and on.
Retail is another leading indicator, and according to Reuters, U.S. retail sales increased more than expected in November as the holiday shopping season got off to a brisk start, pointing to sustained strength in the economy.
Altogether, sales at online retailers, brick-and-mortar stores and restaurants rose 0.8% in November from the prior month, well above the 0.3% increase economists surveyed by The Wall Street Journal expected. That was up 5.8% from a year earlier, the largest yearly November increase since 2011.
Despite their woes from online competition, general merchandisers such as department stores fared well, registering a 3.6% sales increase from a year earlier, the best November performance since 2010. The National Retail Federation expects consumers nationwide to spend about 4% more during the holiday shopping season than they had in 2016. That would make 2017 the strongest holiday season since 2014.
Another factor that may come into play is adjustments to the e-commerce supply chain. Delivery promises were tempered this year and, as a result, shippers got their acts together, after previously experiencing off-putting holiday delays that angered customers and pitted retailers and shippers against each other. Macy's and Best Buy expanded same-day delivery ahead of the season, as UPS upped delivery prices for retailers earlier this spring. Even with all of this, the carrier has pressed drivers into additional service, raising the number of hours drivers work to 70 hours over an eight-day period, up from the 2016 push of 60 over seven days.
With online sales reaching as much as $107.4 billion this year, up from approximately $93 billion in 2016, CBRE estimates that the likely value of returns is $32 billion, up from 2016's estimated $28 billion. While retailers will want to deep dive into the numbers and continue to aggregate data to minimize returns and therefore maximize their margins—and customer’s experience—the logistics industry booms.
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