Just as the consumer goods boom appeared to be in decline, spending got another boost on the heels of more stimulus and spiking COVID-19 cases, posting an unexpected 12% sequential gain in January over December after the holiday spending had passed. FreightWaves Outbound Tender Volume Index (OTVI), which measures truckload electronic tender volumes in the U.S., posted a similar gain in March over February, sharply reversing a declining trend. This relationship has evolved to the point where it appears there could be as much as a two-month lead time on freight volumes.

A few months ago, the chart of the week showed the strengthening relationship between durable goods expenditures and truckload volumes in the U.S. Consumers effectively took the place of the industrial sector inside the domestic freight economy by spending more money on household goods than on non-tangible travel and leisure services. They also had to adapt to things like working and schooling from home, which required furniture and electronic purchases. The trend reversal in January and February has warranted a second look a few months later.

The personal consumption expenditures in the chart above measure the amount of money spent on goods at the personal consumer level, not a business. Personal consumption on durable goods came in 22% higher in January and 17% in February year-over-year (y/y).

The OTVI averaged 43% higher in January and February y/y before the annual comp tightened to 34% even though there was a large leap from February to March. March 2020 tender requests were largely driven around panic purchases of consumer products that characterized the beginning of the pandemic.

Macroeconomic figures rarely lead or help describe trucking volume trends so cleanly as the relationship displayed here. Largely thought to be lagging, or at least somewhat disconnected from measuring freight characteristics at a granular level, the recent macroeconomic environment in the U.S. has funneled much of the trucking volumes into a smaller grouping of commodities.

The smaller amount of types of goods being shipped explains the general connection, while the extreme backlog of orders and low inventory levels explain why there is a new leading relationship between the two variables.

Many companies are still struggling to replenish inventory from the surge of demand in 2020. This means most of the goods, like electronics and furniture, are four to eight weeks away from hitting U.S. soil.

Most consumer goods are manufactured in other countries, with the leading source being China. After the order is placed, production begins relatively quickly. The majority of the time spent between order placement and final delivery has become in transit, which has expanded with container shortages and port congestion, instead of in a warehouse.

The pandemic has made inventory management nearly impossible thanks to production limitations, tight transportation capacity and shifting consumption patterns. For the time being, this relationship appears to offer a solid glimpse of what may be a very active spring and summer.

Lockdown restrictions are easing and warmer weather has arrived in a large portion of the country, which should assist in easing some demand side pressure. But most data points to freight demand cranking close to full throttle for several months.

source: freightwaves.com/news/trucking-gets-another-shot-in-the-arm-from-quarantined-consumers