Indicators Offer Mixed Outlook for Trucking
The consumer price index, compiled by the U.S. Labor Department, fell 0.2% in December. This follows no change in the CPI for November and a slightly greater decline of 0.3% in October. The CPI provides a measure of inflation and the downward movement suggest little or no change in the prices paid for consumer goods, but can also reflect weak demand.
Industrial production fell 0.1% in December, the Federal Reserve said, its smallest decline since August. It is the fifth straight drop for the index, and the 14th drop in 15 months, but can also be consistent with various reports suggesting the factory sector is about to start growing again.
Business inventories dropped 1% in November, the Commerce Department said. The drop was the 10th consecutive decline for the figure, as businesses have been cutting stocks in the fact of weak demand. Many analysts think the "inventory correction" could soon end, and thereby help spur new orders.
The “core” CPI, which excludes volatile products, like energy and food, rose by 0.1%, Labor said. For 2001 overall, consumer prices only increased 1.6% -- their smallest jump since 1998, indicating little or no inflationary pressure on the economy.
Inflation can not only push up overall operating costs for trucking companies, but if overall U.S. inflation rates are rising too fast, it will inhibit the Federal Reserve from cutting interest rates more aggressively to bolster the ailing economy. With the Fed slated to meet at the end of January, this news has raised hopes that the central bank may cut interest rates once again.
Lower interest rates can be good for trucking companies because it relaxes consumers’ and corporations’ access to capital and that can bolster consumer spending. Increased spending and the factory orders that compliment that spending, can boost revenues for trucking companies.
Capacity utilization, the measure of how much factories are being used relative to what they could produce, fell to 74.4% in December, the figure’s lowest point since April 1983.
Industrial production is a measure of the output of U.S. factories, mines and utilities, providing a good indication of what type of demand trucking companies can expect.
Though the figure declined, Bloomberg said analysts believed that the relatively small drop in production was an indication that manufacturing may be pulling out of its long slump.
For the year overall, production slipped 3.9% in 2001 versus the previous year – its poorest year since 1982. In that year production plummeted 5.4%.
Inventories fell to $1.142 trillion in November, their lowest level since December 1999, Commerce said. Inventories had fallen 1.6% in October. Analysts said that the lower inventories will almost certainly force companies to increase orders to restock their shelves, Bloomberg reported.
As businesses see inventories fall, they are forced to have more goods manufactured and delivered. This increases freight demand for trucks in the coming months.
Sales also fell in for the month, declining 1.4% in November after a 2.8% rise in October. The drop in inventories and sales put the inventory-sales ratio, or the amount of time that goods sit on store shelves at 1.39 months.
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