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By: Phil Sneed

(TANDEM LOGISTICS NEWS FEED  9/23/11): Retailers may face a last-minute rush to restock their shelves if household spending improves as it did in the 2009 holiday season.

Declines in imported-container volumes and in shipments by trucking companies  show that “cautious retailers are tightly controlling inventories right now,” said Benjamin Hartford, transportation analyst at Robert W. Baird & Co., a Milwaukee-based investment bank. Shippers will keep supplies low until “there is a clearer picture of consumer demand.”

A similar situation played out in 2009, when companies underestimated sales, then had to expedite merchandise to stores before Christmas amid improving demand. If history repeats, ground and air-transport firms may benefit from a surge in shipments, according to Justin Yagerman, a New York-based analyst at Deutsche Bank Securities Inc.

“Retailers may have to rush goods if spending accelerates in the next couple of months,” Yagerman said. “This could help trucking companies outperform.”

The U.S. consumer has shown little sign so far of wanting to hit the malls. Retail sales unexpectedly stagnated last month, according to the Commerce Department, following a 0.3 percent gain in July that was smaller than estimated by a Bloomberg News survey of economists.

Consumer confidence has fallen to its second-lowest level this year, with the Bloomberg Consumer Comfort Index dropping to minus 49.3 in the week ending Sept. 11.  The unemployment rate remained at 9.1 percent in August as job growth stalled.

Falling Volumes Shipping data currently show retailers preparing for a “muted” holiday season, Hartford said. The combined inbound- container volume at the Los Angeles and Long Beach ports fell 9.4 percent in August from a year earlier, following declines of 2.3 percent and 4.6 percent in July and June, according to Bloomberg data.

The correlation between the six-month average of trucking volumes and Los Angeles and Long Beach port activity is 0.86, according to Bloomberg News calculations. A correlation of 1 would show they move in lockstep, while a value of zero signals no relationship.

Trucking rose 0.8 percent in August from a year ago, down from a recent peak of 4.6 percent in February, according to the Ceridian-UCLA Pulse of Commerce Index, which measures the volume of diesel fuel purchased. Summer Slowdown This summer’s slowdown signals that retailers are “stocking to weaker sales expectations” and are willing to be under-supplied leading up to the holiday season, according to Edward Leamer, chief economist for the Pulse of Commerce Index for Ceridian Corp.

From the investor perspective, “cautious” retailer expectations already are being discounted by trucking stocks, according to David Ross, a Baltimore-based transportation analyst at Stifel Nicolaus & Co. ‘Could Be Upside’ “The expectation is for a fairly low pace of consumer spending,” Ross said. “If things improve, there could be upside for transportation.

The Bloomberg U.S. Trucking Index — has risen 5 percent since Sept. 6, while the Standard & Poor’s 500 Index grew 3 percent, Bloomberg data show. Between Oct. 15, 2009, and March 31, 2010, the index increased 17 percent, compared with the S&P 500’s gain of 7 percent.

Chain-store sales during the traditional rush — Thanksgiving to Christmas — are forecast to rise 3.5 percent this year compared with 2010, according to the International Council of Shopping Centers. That’s “a tad weaker” than last year when annual sales rose 3.8 percent “but considerably slower” than the 5.1 percent average through the first eight months of the year, according to Michael Niemira, chief economist of the New York-based trade association. “I would characterize this year’s holiday season as slow and steady, with downside risk higher than last year,” he said.

Source: Bloomberg News 9/23/11