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Supply
Chain by the Numbers |
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- Sept. 23, 2021
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Estimate of US 2021 GDP Revised Down; FedEx Incurs Giant Rise in Expenses Due to Labor Shortage; US Freight Tonnage Rose in August for First Time since March; Chips Driving Car Production Forecasts Lower again |
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6% |
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| That is the downward forecast for US real GDP growth in 2021, according to an estimate this week from the Organization of Economic Cooperation and Development. That is down from the group’s forecast of 6.9% growth in May. Still, even at the lower level it will mean the US will exceed 3% GDP growth for the first time since 2005 – albeit off a weak year in 2020 when GDP fell 3.5%. The rise in COVID cases is a factor in slowing growth, the report says. It also says that there are other signs of slowing momentum: Retail sales softened in July, and global car sales have also plummeted due to a lack of inventory. On top of that, industrial production and global merchandise trade growth have moderated, due in large part to pandemic-induced supply shortages in key sectors, such as those semi-conductors and also ocean shipping. |
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| That is the level of the American Trucking Associations’ freight tonnage index for August, according to a press release from the ATA this week. That was up just a bit from 109.8 in July. Perhaps surprisingly given what is perceived as the state of the market, this was the first month over month gain freight volumes since March. The baseline for the index is the average month in 2015, meaning at a level of 110.3, US freight tonnage is up only 10.3% since 2025, now almost seven years later, or less than 2% each year on average. “Despite some supply chain issues, demand remains strong for trucking services generally. Truckload carriers are operating fewer trucks than a year earlier, which makes it difficult to increase freight volumes significantly,” said ATA chief economist Bob Costello. Year-to-date, compared with the same eight months in 2020, tonnage again surprisingly is down 0.2%. |
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6.2% |
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That is the latest forecast for the decline in the global car and light truck market in 2021 from IHS Markit as the computer chip shortage continues to wreak havoc on automakers. The research firm also lowered its forecast for 2022 production by 9.3%, according to a release from the company this week. At a panel discussion at this week’s CSCMP Edge conference in Atlanta, Derek Leathers, CEO of major truckload carrier Werner Enterprises, said production of Class 8 trucks in the US would likely be 100,000 or so units below the 350,000 originally forecast, with a lack of chips being a primary cause. In response, GM this week it is changing its approach to acquiring chips, and will work directly with chip manufacturers rather than buying them through channels. GM said consumer demand is also a key factor, not just in terms of units but for vehicles that are becoming more of a software platform – requiring additional chips. |
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That is how much extra costs FedEx incurred in its most recent fiscal quarter due to the on-going labor shortage, the company said in its earnings report this week. FedEx said the lack of labor led to increased overtime, higher wages to attract workers and extra spending on expedited transportation. The company cited the specific example of a sorting hub in Portland, Ore., that had 65% of the workers needed to handle the normal number of packages that go through that facility. To catch up, FedEx is diverting 25% of the volume bound for that hub to other locations, adding trucking routes and hiring more third-party transportation companies – all costly moves. FedEx said it is raising pay levels and paying premiums for weekend shifts to try to attract more workers. It also is adding more than a dozen automated sorting facilities to get more throughput at its facilities given the labor situation.
