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  First Thoughts

    Dan Gilmore


    Supply Chain Digest

July 24, 2020

1H 2020 Supply Chain in Numbers and Charts

From Economic Growth to Freight Volumes and Rates to What Happened in ecommerce, We Have It All


As I wrote about two weeks ago, there was only one real story in the first half of 2020 in supply chain and certainly beyond, and that of course is the coronavirus, which will have a profound impact on society and business and therefore the supply chain. (See Six Months that Changed the Supply Chain World Forever.)

But despite the dominance of the pandemic over everything, this week we offer our popular look at the first six months of 2020 in numbers and charts.

Gilmore Says....

eCommerce is believed to have shot up much higher in Q2 due the stay at home economy, maybe jumping 20% or more, as the brick and mortar retail sector is in deep trouble.

What do you say?

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We always start with a check on the US and global economy, as that has such an impact in the end on supply chain practice.

Real US GDP was up 2.3% in 2019, as reported in early 2020. That was down from 2.9% growth in 2018, when the US came within a whisp of reaching 3% growth amazingly for the first time since 2005, before which it happened with regularity.


Nevertheless, the economy felt strong entering the year, with record low unemployment - then the  virus came, first in China, then Italy before landing in the US.


That ulimately sent Q1 real GDP down 5%, but that ain't nothin, as they say. The official Q2 numbers aren't out yet, but the Atlanta Federa Reserve Bank's most recent estimate is for a drop of 35%. Yikes.


The International Monetary Fund expects the global economy to drop 4.9% in 2020, the largest decline since the Great Depression in the 1930s. It expects a rebound of 5.4% growth in 2021, but that won't get us back to 2019 levels. The IMF forecasts US GDP will fall 8% for the full year, far worse than in the 2008-09 steep recession, while Euro-zone economies are predicted to fall an even worse 10.7% in 2020.

Consistent with the rapidly falling economy, the US Purchasing Managers Index from the Institute of Supply Management fell to a dismal 41.5 in April, well below the 50 mark that separates US manufacturing expansion from contraction. As seen in the chart be
low, May saw another vey lousy level of 43.1, but the PMI saw growth in June at 52.6.


Still the PMI has been below 50 for 8 of the past 12 months.


Another view of US manufacturing strength is the index on output for US factories from the Federal Reserve.


Before March, the index hovered around 104-105. What that means is the US manufacturing was staying between 4-5% above baseline 2012 levels (index = 100) - meaning growth of well less than 1% annually now 8 years later.


The index then dropped to 99 in March before collapsing to 83 and 87 in April and then May, rebounding a bit to 93 in June, though that is still 7% lower than 2012.

Oil prices had an odd six months. They started the year at abount $61 per barrel, falling about 36% to just over $39 for West Texas crude by the end of June, as shown below.


But in the middle, in mid-April, oil prices actually went negative, meaning you had to pay someone to take oil off your hands- about $37 it turned out. It happened due to a short term lack of storage capacity as demand for oil collapsed in the pandemic.  

US on the road diesel prices started the year at $3.07, then fell slowly but steadily, bottoming out at $2.38 the week of May 18 and then again the week of June 11, before rising to $2.48 by the end of June.


Freight volumes took a hit overall with the virus crisis, but how much depends on where you get the data. The Freight Tonnage Index from the American Trucking Associations was down a very modest 2.4% for the first six months of the year. But the Cass Shipment Index took a dive in April, down 23% versus 2019. then down 24% in May and an only slightly less ugly 18% in June.


The Cass Linehaul Index, which tracks per mile truckload contracted rates in the US before any fuel surcharge or other accessorial fees, was down 5.9% year-over-year in June, That follows a 5.0% drop in May.


But spot rates tell a different picture. Cass says spot rates are currently tracking up 9.8% year-over-year (including fuel surcharges) in the dry van market, while reefer spot rates are up 4.6%.


It was a tough first half for US railroads. Total US rail traffic for 1H 2020 was down 13.2%, while the once fast growing intermodal component was down 10.6%.


In terms of ocean container carriers, the China Containerized Freight Index had started falling  at the end of 2019, starting the year at about 840, which means averaged rates for container shipping out of China were about 16% below those seen in 1998!

The index stayed mostly flat for the rest of the first half, coming in last week at 862.

The World Trade Organization says global trade fell 3% in the first quarter and an estimated 18.5% drop in the second quarter - an unprecedented decline.

The growth of ecommerce sales in the US remains strong. Growth in Q1, the most recent number we have, was 14.8%, according to the Commerce Depart. But it is widely believed to have shot up much higher in Q2 due the stay at home economy, maybe jumping 20% or more, as the brick and mortar retail sector is in deep trouble.

Amazon stock is at about $3000 per share, up about 50% in the past year. Jeff Bezos apparently saw his net worth jump a staggering $13 billion on a single day this week.

I have lots more but am out of space. Hope you enjoyed all this.

What is your reaction of 1H supply chain 2020 in numbers and charts? What would you add? Let us know your thought at the Feedback section below.

Your Comments/Feedback

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