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Today’s Pickup: retail sales strongest in years; oil rises; signs of bear market?

Good day,

‘Tis nearly the season now for reverse logistics, but meanwhile retailers and parcel carriers are delivering strong results along with signals of steep changes in sales and shipping patterns this holiday season. Early measures suggest stores met lofty sales expectations, according to the WSJ, as Americans crowded stores and retailers wrapped up one of the strongest holiday seasons in years. U.S. retail sales rose 5.2% from Nov. 1 to Dec. 19, and Mastercard SpendingPulse says online sales rose 18.3% during that time and accounted for a record 13% of total sales. In-store sales grew a whopping 4.3%. Also, the delivery backbone of the online economy has held up, with ShipMatrix Inc. reporting on-time performance at FedEx (Nasdaq: FDX) and the USPS was on track with last year while UPS (Nasdaq: UPS) improved its deliveries thanks to extra capacity and new technology. Do carriers have new lessons from this season to take into 2019?

Did you know?

The ratio of oil vs. gold, to get seriously thrown off its historic norms for any lengthy period of time, needs a big disruption. Gold supply disruption is almost impossible; it’s been a store of value for thousands of years and increases only incrementally. But in the history of oil, it is possible there hasn’t been anything as short-term disruptive as shale. Other technological breakthroughs, like deepwater drilling, took time to make their impact. Shale did it in a few years.

Quotable:

“You don’t always want to build the church for Easter.”

—Justin Schuhardt, senior director of operations for Walmart e-commerce, on on-demand warehousing

In other news:

U.S. stock futures advance as S&P 500 teeters on bear market

U.S. equity futures rose after a volatile start as investors assessed comments from President Donald Trump that he was confident in Treasury Secretary Steve Mnuchin and the American economy. (Bloomberg)

U.S. holiday retail sales are strongest in years, early data show

Sales excluding autos rose 5.1% between Nov. 1 and Dec. 24 from a year earlier. (WSJ)

Oil rises to $51 after steep slide; growth fears weigh

Oil rose to $51 a barrel on Wednesday on perceptions that a price slide to 2017 lows prompted by economic worries had been overdone amid an OPEC-led effort to tighten supply. (Reuters)

A festive rate respite, but carriers may be in for ‘a bumpy ride’ in 2019

With US retailers now reported to be overstocked after the advance booking rush to beat the postponed 1 January tariff hike on Chinese imports, demand is proving weaker than the seasonal norm, forcing carriers into heavy discounting. (The Loadstar)

U.S. railroads log carload, intermodal gains in Week 50

U.S. railroads reported a 3.9 percent increase in carloads and intermodal units for the week ending Dec. 15 compared with traffic levels reported for same week in 2017, according to Association of American Railroads (AAR) data. (Progressive Railroading)

Final Thoughts:

The average operating ratios (ORs) continue to fall into the 4th quarter of 2018. This is in drastic contrast to late 2017 when operating ratios climbed through the mid and upper 90s. This may not make sense to many who follow the freight market as late 2017 was considered a very volatile time, and this year has been quite the opposite. Most of the volume this fall has come from southern California and there have been no big disrupting events. Carriers have benefited from consistent freight patterns and elevated rates enabling them to get the best of both worlds, leading to increased operating efficiency and more revenue for the same work. If demand and volume continues to fall ORs will start to head back up as utilization becomes a factor.

Hammer down everyone!

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Chad Prevost

Chad is radio host and broadcast media specialist for FreightWaves.
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