Different surveys, same message: U.S. economy has cooled

Two reports, one freight-specific and the other more general in nature, are adding to the mounting evidence that U.S. economic activity has cooled.

A quarterly survey of 500 U.S. and Canadian shippers released Tuesday by Morgan Stanley & Co. found that respondents were scaling back their economic forecasts due to macro-economic anxieties. According to "Freight Pulse 26 Shipper Survey: Macro Concerns Weigh on Freight Outlook," shippers, in aggregate, gave the U.S. economy the lowest grade since September of last year.

At the same time, respondents seem to have put their inventory restocking plans on hold. About 49 percent in the June survey said they plan to reduce inventory levels, up from 34 percent in March. About 14 percent said they would increase inventories, down from 23 percent in the last survey period.

Traffic expectations have also slowed for all trucking groups, the survey said. Rate expectations have cooled as well, a positive sign for shippers but not enough to offset concerns about volume declines. Shippers expect truckload capacity to remain tight for the next six months, according to the survey.

About 31 percent of all respondents expect to boost their rail volumes by 1 to 3 percent during the next six months. Nearly 44 percent expect rail rates to increase between 3 and 5 percent during that time. Parcel growth is expected to accelerate across all three categories: domestic air, domestic ground, and international, the report said.

ISM data shows weakness
The uneven numbers from the transport side came the same day the Institute for Supply Management (ISM) released its June data on manufacturing activity that showed economic activity contracted from the prior month. The Purchasing Managers Index (PMI), an aggregate of 10 sub-sectors of economic activity, fell to 49.7 percent from 53.5 percent in May. A reading above 50 percent indicates an expanding economy, while a reading below 50 reflects a contracting economy, ISM said.

The PMI stands at its lowest level since July 2009, according to the data.

An index that tracks new orders plunged 12.3 percentage points in June over May, falling to its lowest level since April 2009. Export orders fell 6 percent month-to-month, as weakness in the Euro Zone and a slowdown in China dampened export activity.

The one bright spot in the index was a 10.5 percentage-point drop in the index for raw materials prices. Since the world emerged from the 2008–09 recession, many in the supply chain were concerned that rising commodity prices would spark inflation and choke off growth.

An executive in the plastics and rubber products industry was quoted in the survey as saying that a "significant raw materials price correction [is] underway."