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Cost to Move Freight Continues to Rise as Economy Slows

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By: Phil Sneed

Latest news feed from Tandem Logistics  6/22/2011:

Freight expenditures inched up 1.7 percent in May from April levels. The gap is narrowing for payment increases in year-over-year comparisons –  up 29.9 percent over last year in May, lower than the 34.9-percent jump in April. Fuel surcharges continue to be the major source of increased costs as fuel prices continued to soar in May. The increase in retail sales was primarily at fuel outlets and discount stores. Inventories are building slowly and retailers are using pricing to bring them more into line. The volume slowdown, coupled with the fuel surcharges, slowed down any real rate growth that we experienced earlier in the month. Capacity is still not a widespread issue, so there is no pressure from the demand side to push rates up. Expect rates to remain fairly level, but overall payments may drop if volumes fall off more.

The economy is in a stall, and what remains to be seen is the extent. The economy began to weaken after the impacts of the federal stimulus diminished, and contraction in the public sector has removed jobs and funds that went into the private sector. Manufacturers have responded to declining demand by slowing production and laying off workers. The average work week, which had been rising as employers wrung all the productivity they could from current workers, has leveled. This means new hires are less likely. Prices for consumer necessities like food, fuel, and medicine are increasing, meaning there is less money left over for discretionary purchases. Our underlying economy has shown very feeble signs of strengthening since the end of the recession, so we still are not confidently leaving the recession behind, but are probably in for more of the same.

Cass Information Systems | June 08, 2011