• ITVI.USA
    13,924.900
    3.330
    0%
  • OTRI.USA
    22.080
    -0.170
    -0.8%
  • OTVI.USA
    13,904.220
    5.970
    0%
  • TLT.USA
    2.650
    0.000
    0%
  • TSTOPVRPM.ATLPHL
    2.480
    0.060
    2.5%
  • TSTOPVRPM.CHIATL
    2.190
    0.050
    2.3%
  • TSTOPVRPM.DALLAX
    1.400
    0.180
    14.8%
  • TSTOPVRPM.LAXDAL
    2.730
    0.160
    6.2%
  • TSTOPVRPM.PHLCHI
    1.440
    0.040
    2.9%
  • TSTOPVRPM.LAXSEA
    2.870
    -0.010
    -0.3%
  • WAIT.USA
    108.000
    5.000
    4.9%
  • ITVI.USA
    13,924.900
    3.330
    0%
  • OTRI.USA
    22.080
    -0.170
    -0.8%
  • OTVI.USA
    13,904.220
    5.970
    0%
  • TLT.USA
    2.650
    0.000
    0%
  • TSTOPVRPM.ATLPHL
    2.480
    0.060
    2.5%
  • TSTOPVRPM.CHIATL
    2.190
    0.050
    2.3%
  • TSTOPVRPM.DALLAX
    1.400
    0.180
    14.8%
  • TSTOPVRPM.LAXDAL
    2.730
    0.160
    6.2%
  • TSTOPVRPM.PHLCHI
    1.440
    0.040
    2.9%
  • TSTOPVRPM.LAXSEA
    2.870
    -0.010
    -0.3%
  • WAIT.USA
    108.000
    5.000
    4.9%
News

Commentary: COVID-19 impacting US manufacturers differently

The views expressed here are solely those of the author and do not necessarily represent the views of FreightWaves or its affiliates.

A consensus is emerging that a unique feature of the COVID-19 pandemic on freight markets is that it has created tremendous imbalances on carriers’ lanes. 

J.B. Hunt, for example, noted challenges with balancing intermodal containers and C.H. Robinson’s CEO pointed out difficulties balancing truckload capacity. Changes in consumer buying behavior have been one major driver of freight imbalances, with panic buying in March resulting in surges in sales for food and beverage stores [e.g., Kroger] as well as general merchandise [e.g., Walmart].

In contrast, May and June saw unseasonably large gains for building material and garden equipment centers [e.g., The Home Depot] and nonstore retailers [e.g., Amazon] and continued strength in food and beverage stores.

Another cause of freight imbalance has been differential impacts of COVID-19 on manufacturing firms. With the release last week of June’s industrial production and capacity utilization (G.17) data, we can get a better sense of how different sectors were affected by COVID-19-induced lockdowns and how these sectors are rebounding from these lockdowns.

To understand how the COVID-19 lockdowns have differentially affected manufacturing output requires combining two different types of data series. The first are industrial production indices for each three-digit NAICS manufacturing sector. The industrial production indices are calculated using a Fisher-ideal index formula and capture the change in output for each industry. The relative importance weights capture the proportion of total real output each sector represents for the omnibus industrial production index, which combines manufacturing, mining and utilities.

The plot below displays the June 2019 relative importance index for each manufacturing sector and the year-over-year percent change in industrial production for each sector in June 2020 relative to June 2019. Examining this plot, several features stand out:

  1. The only sector that saw an increase in output was computers and electronic products (NAICS 334). This makes sense given remote working and learning have placed incredible demands on technology products such as networking equipment.
  1. Consistent with prior reporting regarding manufacturing employment, the durable goods sector has been more seriously affected by lockdowns. Primary metals, transportation equipment, machinery and fabricated metal products stand out as large sectors that have been particularly hard hit. As these are freight-intensive sectors, this may explain why the Cass Shipments Index showed a 17.8% year-over-year decrease as of June per the latest report.
  1. Declining demand for gasoline has affected output in the petroleum and coal product sector (NAICS 324).
  1. Not surprisingly, chemical and food manufacturing have been less seriously affected by lockdowns.

Looking at the most-affected durable goods sectors over time suggests the rate of recovery differs. To illustrate, below is a plot for primary metals, transportation equipment, machinery and fabricated metal products over time.

Examining this figure, we see that transportation equipment saw a precipitous drop in April due to the near-complete shutdown of motor vehicle production and a substantial reduction in parts production. But production has recovered quickly. In comparison, while machinery and fabricated metal products saw a less-precipitous decline, they are recovering from their lows at a much slower rate. Lastly, primary metals have shown little improvement.

Moving forward, it is difficult to predict how manufacturing sectors will behave due to the resurgence of COVID-19 cases. For example, July is traditionally a month in which the motor vehicle manufacturing sectors (NAICS 3361-3) have substantially lower output, but this seasonality may not hold.

We should see strong demand for shipments of nonmetallic minerals products given output peaks during the summer months and into fall. Robust demand for lumber should continue to spur demand for flatbed transport. However, if one thing is constant with this crisis, it is that freight markets will behave in unpredictable ways.  

Tags
Show More

Jason Miller

Jason Miller is an associate professor of logistics (with tenure) in the Department of Supply Chain Management at Michigan State University's Eli Broad College of Business. His research predominantly focuses on issues pertaining to the motor carrier industry. These topics include motor carriers' safety performance, compliance with and consequences of the electronic logging device (ELD) mandate, productivity, driver turnover, and market dynamics (e.g., how spot market rates influence contract rates). His research has appeared in Academy of Management Journal, Journal of Business Logistics, Journal of Management, Journal of Operations Management, Journal of Supply Chain Management, Multivariate Behavioral Research, Transportation Journal and Transportation Research: Part E, among others. He completed his Ph.D. in business administration with a concentration in logistics and a minor in quantitative psychology from The Ohio State University in 2014.

2 Comments

  1. I seen foreign black people say in the fuel island that have their own truck and trailer driving as a owner operator SAY I went through Apex capital slash startup to drive as my own trucking company and I use CH to get load’s. I don’t have to deliver the loads either. Sometimes I pick up a load and put it in my garage or sell it to Africa, Canada or Mexico instead of delivering it. Insurance pays for not delivering the load to the receiver

Leave a Reply

Your email address will not be published. Required fields are marked *

Close