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Shipping orders "collapsed" in April! The market is facing a "freight recession"!" Shipping Logistics | International Logistics | International Freight Forwarders | Guangzhou Freight Forwarders | Panyu Freight Forwarders | Hongde International
May 05,2023
The transportation industry has long been seen as an important barometer of the U.S. economy.Recently, a number of transportation companies, including airlines and highways, announced new financial reports that fell sharply short of expectations, indicating that there is a risk of cooling consumer demand.
According to data released by the Bureau of Economic Analysis of the U.S. Department of Commerce, real GDP in the first quarter was 1.1 percent on an annualized quarter-on-quarter basis, with the previous value of 2.6 percent and an expected 2.0 percent, two consecutive quarters of slowdown. The Fed's highly-watched inflation indicator, the U.S. Personal Consumption Expenditure (PCE) price index, was 3.7 percent at the beginning of the first quarter on an annualized quarter-on-quarter basis, compared with a previous value of 1 percent and an expected 4.3 percent. The core PCE price index, which excludes food and energy, rose 4.9 per cent month-on-month, compared with 4.4 per cent and an expected 4.7 per cent.
Data from the U.S. Bureau of Economic Analysis show that although the U.S. economy did grow in the first quarter of 2023, recording 1.1 percent, the growth rate slowed significantly, far below the expected 2 percent and 2.6 percent in the fourth quarter of 2022, which indicates a slowdown.
CNBC reviews the initial annualized quarterly rate of real GDP in the first quarter of the United States, pointing out that in the first three months of this year, the U.S. economic growth slowed sharply,The main reason is rising interest rates and inflation. It is widely expected that the US economy will decelerate further in the future.
The Silicon Valley bank bankruptcy is an event that the market is very concerned about, it may have a certain impact on market confidence. In addition, the Fed's rate hike cycle could have broad implications for the economy and markets. As interest rates rise and the cost of investment rises, businesses may start to invest and hire less, and consumers may spend less. In this way, economic growth may be suppressed, which may cause more companies to face difficulties, and may even trigger a recession.
Hongde Xiaobian thinks:The likelihood of a recession in the next year has surpassed the peaks of the past four hard landings in the U.S. economy, and the market may need to prepare for potential volatility.In this case, the market needs to remain vigilant and take corresponding measures to reduce risks.
Transportation Industry Reveals Economic Fluctuation Signal
The Dow Jones Transportation Composite Index, which tracks 20 U.S. transportation stocks in industries such as aviation, trucking, shipping, express services and logistics, has lagged significantly behind the broader market since hitting a high in early February, with signs of an inflection point growing stronger.The Dow Jones Transportation Composite Index lagged the broader market, suggesting some problems in the transportation and logistics industry.
As an insight into the supply and demand situation of a wide range of industriesTransport and logistics industry is seen as a bellwether of the economyIn fact, combined with recent manufacturing performance and consumption data in several regions, there are signs that economic momentum is indeed under pressure to slow. This means that in the next few months, the transportation and logistics industry may face greater challenges due to the downward trend of economic growth.
The pressure on commodity trade is already evident. In its new Trade Outlook and Statistics report, released in April, the World Trade Organization (WTO) said that global merchandise trade is expected to grow by 1.7 percent this year, following growth of 2.7 percent in 2022, affected by the conflict between Russia and Ukraine, high inflation, tight monetary policy and financial market uncertainty. Data from supply chain heatmap provider FreightWaves SONAR shows that,In April, shipping orders from all ports in the world and from all ports in the United States fell by half year-on-year. As the cargo decreased, the volume of freight by truck and rail fell back sharply.
As a bellwether of the freight market, J.B.Hunt, a large trucking and logistics company in the United States, reported a more-than-expected decline in net profit in the first quarter, according to company president Sipson (Shelley Simpson)Says it is facing a "freight recession". "We are in a challenging freight environment, with deflationary pressures on transport prices for an industry that continues to face inflationary cost pressures," he said on a conference call."
Logistics giant UPS's earnings report last week was also dismal, with first-quarter revenue down 6% and earnings per share down 27% year-on-year. UPS said that as high inflation curbed discretionary spending, online sales that peaked during the epidemic began to fade,The slowdown in the U.S. retail sector has led to lower-than-expected traffic, and most delivery companies are facing the problem of excess distribution capacity.
It is worth noting that, according to the statistics of the US Department of Transportation, since the 1980 s, the inflection point of the transportation industry has been 4 to 5 months earlier than the overall economy. And according to the Zui New Agency of the American media,The likelihood of a U.S. recession during the year has risen to more than 60 percent.The results of the New York Fed combined with the U.S. bond yield curve model show that,The probability of a recession in the next 12 months is 57.7 percent., higher than the peaks of the economic turmoil in 1991, 2001, 2008 and 2020, and close to the extremes set in the 1980 s, when the Fed was also fighting a period of ultra-high inflation.
Be alert to the risk of market turbulence
Combined with recent financial reports from transportation companies, the agencies believe that,Weak demand and high cargo transportation costs continue to make the company face difficulties and also show the uncertainty facing the economy.
For the United States, the impact of weak business activity under the interest rate hike cycle will likely continue in the second quarter and beyond. It's worth noting that another previously released forward-looking data, the leading indicator of the U.S. business cycle, has fallen for the 12th consecutive month and hit a low level of zui since November 2020. The last time the indicator showed a similar trend was during the 2008 financial crisis.
Hongde Xiaobian learned that Monica (Justyna Zabinska La Monica), senior manager of business cycle indicators of the Chamber of Commerce, said,The sub-indicators are consistent with deteriorating economic conditions in the future. The economic weakness will intensify in the next few months and spread more widely in the US economy. The recession will also start in mid -2023.
Source: Shipping Network First Finance
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