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Showing posts with label ISM Index. Show all posts
Showing posts with label ISM Index. Show all posts

Friday, June 7, 2013

More Signs of a Financial Economy; Not a Production Economy

On June 3 the Institute for Supply Management issued their May ISM index and it came in at 49.  Unfortunately, this means the manufacturing component of our economy actually contracted in May (despite all the talk of a manufacturing renaissance).  This is the lowest since November of 2012 and the lowest level since June of 2009.

Both the price index and employment index showed decreases as well.  This is aligned with the CASS readings of a relatively soft economy resulting in balanced, or slightly in shipper favor, rate environment.

My opinion is this is one reason why you are seeing the markets swoon back and forth as the economy is teetering between growth and contraction.  Every little bit of data could tip it in one direction or another. Expect continued contraction and caution in any type of growth which will continue to keep transportation capacity and shipments in balance.  We have evidence that rates are flat at best and could be falling and clearly intermodal / rail is taking business from trucking.

 One area where this is very noticeable is in the cross border moves where trucking is losing to rail.  This, of course, releases capacity to other areas for movement.  (see chart to the left)

Bottom line:  Economy is slow, shipments are down, and capacity is balanced.