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  First Thoughts

    Dan Gilmore


    Supply Chain Digest

July 20, 2018

1H 2018 in Supply Chain in Numbers and Charts

We Look at the Economy, US Manufacturing, Freight Rates, Oil Prices and More


It is a big time cliche, but a picture really is worth a 1000 words.

I can say that definitively, because when I put together these reviews of the past year or half year in supply chain, the graphics I use really do tell the story - wish I had room for more.

Last week, I provided a month by month chronology of the top stories for the first six months of 2018, which you will find here: What Happened in Supply Chain in 1H 2018?

Gilmore Says....

Spot market load availability set a record in June, increasing by 9.3% month-over-month and 18% compared with June 2017, according to the DAT Freight Index.

What do you say?

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This week, I am back with a look at the 1H in what I call numbers and charts. So let's go.

In an important change, the economic environment that has such a big impact on our supply chains went from lukewarm in the 1H in 2017 to what seems to be the strongest economy in many years.

Q1 real GDP growth came in at a so-so 2%, but that was up from Q1 2017's rate of just 1.4%, as Q1 numbers have been weak for many years running for reasons economists can't explain.

But the Q2 numbers, soon to be released, are expected to be better – perhaps much better. The Federal Reserve Bank just said that growth in the second quarter was "considerably stronger than the first."

Could we see the first year of real GDP growth for the first time (amazingly) since 2005? Looks like that is a real possibility, which would end a longer stretch without that level of growth than has been seen for decades (I checked back to 1950) and perhaps in the history of the US, at 12 years running.

The IMF's just released forecast predicts overall global economic growth of 3.9% for both this year and next, up a bit from 2017 (3.7%). It expects as usual developing economies (4.9%) to grow much faster than developed ones (2.4%). The IMF, however, is also concerned rising trade wars could cut those expected growth levels.

The IMF also predicts global trade growth of 4.5% for 2018, notably above its forecast for global economic growth. That is back to how it was from the 1990s until the Great Recession. Then something changed, and global trade fell below GPD growth, playing havoc on ocean carriers which had loaded up on capacity.

eCommerce rolled on, up 16.4% in the US in Q1, the last data point from the US Commerce Dept., and 16.8% in Q4 2017, as the growth rate stays 14-16% quarter after quarter, much faster of course than brick and mortar retail growth. But total retail sales were up a solid 4.9% through June, though that number includes restaurant sales. Still, good news for brick and mortar.

US manufacturing once again provided some mixed signals. The US Purchasing Managers Index from ISM was largely on fire, well above the 50 mark that separates manufacturing expansion from contraction in each month of the 1H, with June's 60.2 illustrating the economic strength seen it appears in Q2 (see graphic below).


But as was true last year, the data coming from the US Federal Reserve on US manufacturing output was less positive, showing basically flat output for most months, as show in the graphic below. June's for production level, for example, was up a modest 1.9% versus the prior year. I do not know how to reconcile the difference between what the ISM and Fed data say. And at a level of 103.9, it means June output was up just 3.9% from the baseline year of 2012, six years later.


In a dramatic change from 1H 2017, transportation costs soared. The Cass Linehaul Index, which measures US truckload rates, was way up in the first six months of the year, rising between 6.5% and 9.5% year over year, as shown in the chart below. The June increase was the highest in the history of the index dating back to January 2005.


Freight demand combined the driver shortage has the market firmly in the hands of the carriers. Spot market load availability set a record in June, increasing by 9.3% month-over-month and 18% compared with June 2017, according to the DAT Freight Index. DAT adds that compared with June 2017, contract rates jumped by 19%, and spot market rates are up 29% year-over-year. Spot rates are also unusually above contract pricing – another sign of these unusual times.

The ATA Freight Tonnage Index was up 8% through May versus 2017, far outpacing the annual gain of 3.8% in all of last year.

Oil prices were very interesting, continuing the rise starting in the second half of 2017 The price started January at $60.37, rising to the the highest price of the 1H on the last trading day ($74.15), an increase start to end of 23%.

However, it was not quite as bad for diesel pricing, which started the year at $2.97 and ended at June at $3.23, and increase of a more modest 9%.

There is more but I am totally out of space. Hope you have enjoyed these two reviews of the 1H in supply chain.

Any reaction to this review of 1H 2018 in numbers and charts? Let us know your thoughts at the Feedback section below.

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