US Consumer Continues to Spend
RedStone Resource
September 16, 2022
Inside This Edition
Falling Maritime Rates as Global Supply Chain Faces Continuing Hurdles
Maritime rates around the world continued their deceleration trend as China and Europe both start to face industrial production challenges. The global supply chain situation is getting more complex by the week as supply chain disruptions begin to affect output.
Diesel Inventories Inching Up as Demand Drops
Diesel inventories in the United States increased to 116 million barrels which is the highest levels since February of this year. They remain at the low-end of the historical range which is the lowest going back to 2014.
Transportation Producer Prices Decelerate
Producer Prices (like many other services and commodities nationwide) are coming off their all-time peak highs from earlier this year and most are showing some month-over-month price easing, but many remain in their historically high ranges.
ECONOMIC BRIEFING
US Consumer Continues to Spend
US consumer retail spending grew at a 9.1% year-over-year rate through August according to the Census Bureau. It was up sequentially by 0.3%, and slightly ahead of expectations. When adjusted for inflation, real retail sales were up 0.8%. Although that sounds like a small increase, it was only the second positive inflation-adjusted sales rate since February.
Stripping out fuel and automotive, retail sales were 8.9% higher year-over-year.
Standout performing sectors (based on year-over-year growth rates) included home improvement (+10.5%), e-commerce (+11.2%), automotive dealers (+6.5%), grocery (+7.7%), and restaurants (+10.9%). Sectors showing the largest drops year-over-year were furniture (-1.6%) and electronics and appliance stores (-5.7%).
Falling Maritime Rates as Global Supply Chain Faces Continuing Hurdles
Currencies around the world are generally falling against the dollar as the US Federal Reserve hikes interest rates. The Chinese yuan has lost 10.7% against the dollar since the beginning of the year. But other currencies are losing even faster, the British pound is down 21% against the dollar and the Japanese yen is at 24-year lows.
The US supply chain is mixed between those sectors that are sitting on overstocked inventory to sales ratios, and those that are still well understocked. This strength in the dollar obviously helps any firms importing, but it is creating a hardship on those companies trying to export. That will hit some countries hard as they try to purchase critical staples like food, medicine, and energy, much of which is sourced heavily from the US. And this situation comes at a time when many areas of the world are facing drought or war-induced shortages of critical supplies.
The Federal Reserve is expected to hike rates two more times before the end of the year. In all, it has forecasted to take another 75 basis points in the next meeting and 50 basis points just before the end of the year.
TRANSPORTATION BRIEFING
Diesel Inventories Inching Up as Demand Drops
Diesel inventories in the United States increased to 116 million barrels which is the highest levels since February of this year. They remain at the low-end of the historical range which is the lowest going back to 2014. Diesel exports continue to be robust but dropping US demand has pulled prices down to $4.98 a gallon nationwide according to the AAA. These rates are 14% lower than their all-time peak hit in June, but they remain 51% higher than a year ago.
Questions remain about the impact on diesel prices after October when the US Administration discontinues releasing a million barrels a day from the Strategic Petroleum Reserves and heating oil demand hits a faster pace. Petroleum accounts for 45% of the price of a gallon of diesel and European demand for US energy resources remains robust.
Transportation Producer Prices Decelerate
Producer Prices (like many other services and commodities nationwide) are coming off their all-time peak highs from earlier this year and most are showing some month-over-month price easing, but many remain in their historically high ranges. That was the case for truckload prices which the PPI reported as being down 1.3% month-over-month, but they remained 18.0% higher year-over-year. The Producer Price Index (PPI) includes both contract and spot rate and includes fuel.
Less-than-truckload rates were also down month-over-month by 4.7% but they also remained in the upper end of their historical range for now and were 14.1% higher year-over-year.
Rail prices told the same story but were down month-over-month much less at just 0.4%. On a year-over-year basis they remained 10.7% higher.
