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Supply Chain by the Numbers

- Sept. 10, 2021

  Supply Chain by the Numbers for Sept. 10, 2021

US Truck Rates Heading Still Higher; GDP Forecast Revised Down; Younger Truck Driver Pilot Coming; Big Fine in Kraft Heinz Procurement Scandal



That is the big rise in US spot market truckload rates for all of 2021 expected by transportation analyst firm FTR, as presented in a webinar earlier this week. The firm predicts that by the end of next year that US spot rates will still be higher than they were even at the 2018 peak. FTR also estimates US contract truckload rates will rise 13% for the year and continue rising until they finally peak in early 2022, as the supply-demand balance remains strongly in the truckers' favor. Even though most US truckload volumes are moved under contract rates, high spot rates tend to pull truckload rates higher as well, as carriers move assets to the spot market and its superior economics. With regard to LTL, FTR forecasts that rates will be up about 15% in 2021, but then stall or even decease slightly next year. FTR sees truck shipments rising about 6% in 2022, but that is against in total weak 2020 volumes. They say volumes will be just marginally above where they were in 2019. FTR sees 3-4% growth shipments in 2022.


That is how old truck drivers could be and cross state lines in a pilot program authorized by the infrastructure bill the Senate approved in August. The test would allow drivers 18 to 20 years old, younger than the age 21 bottom limit for interstate driving, though most states actually allow younger drivers for intra-state routes. Those in favor of the change say that many younger drivers already drive long distances within big geographic states such as Texas and California. Others cite the proposed apprenticeship program’s requirement for 400 hours of training that would add another layer of safety versus what is needed to get a commercial license if a driver is 21 or older. However, highway-safety advocates warn that putting young drivers in big rigs will make roads more dangerous. They cite an analysis by the Insurance Institute for Highway Safety showing that teenagers are far likelier to crash than older drivers. The pilot program would involve 3,000 drivers. The House is due to take up the bill this month.




That is the new forecast from Goldman Sachs for US full year GDP in 2021, after cutting its estimate from 6.2% previously. The good news: it appears almost certain that the US economy will surpass the 3% growth level that hasn’t been reached since 2005, when it used to be commonplace. The investment bank cited effects from the spread of the COVID delta variant for its downward revision. Just a few weeks ago, Goldman Sachs cut its third-quarter US GDP estimate to 5.5% from 9% for the same reason. In more good news, hovever, weaker growth this year will set the scene for a pickup in 2022, according to the Goldman research note. Its economists raised their forecast for US GDP growth to 4.6% in 2022, up from a prior estimate of 4.3%.




That was the fine levied this week by the Securities and Exchange Commission (SEC) against Klaus Hofmann, chief purchasing officer at food giant Kraft Heinz Corporation before leaving in May 2020. The fine was related to fraudulent contracts Kraft Heinz entered into with various vendors – 59 transactions in total – that were arranged primarily to find more of the $1.5 billion in cost savings that Kraft and Heinz had promised investors when they merged. The SEC cited dfferent categories of fraudulent contracts, such as one type categorized as a “pre-bate,” in which vendors provided discounts and credits in exchange for contract extensions and future-year volume purchases, which were falsely stated as savings for past or same-year purchases. The SEC noted that if the transactions had been properly executed, Kraft Heinz’s cost of goods sold during the period would have been around $50 million higher than reported in its public financial statements. Earlier, the company’s former operating officer Eduardo Pelleissone was accused of similar violations and paid a $300,000 fine, while Kraft Heinz itself has agreed to a penalty of $62 million.

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