Weak Manufacturing Activity is Felt Across all Transportation Modes

October 3, 2019


The ISM manufacturing activity for September recorded the lowest reading in more than 10 years. Coming in at 47.8%, it was the second consecutive month of contraction. Any figure below 50% signals a contraction.

Commentary from the monthly ISM survey:

  • “Incoming sales are sluggish for this time of year.” (Furniture & Related Products)
  • “Chinese tariffs going up are hurting our business. Most of the materials are not made in the U.S. and made only in China.” (Food, Beverage & Tobacco Products)
  • “Business outlook remains cautious. Orders seem to be decreasing, but luckily not as sharp of a decrease as we were expecting.” (Transportation Equipment)

ISM’s subsegment, new export orders, contracted for the third month in a row and had its lowest reading since March 2009. The U.S. is not alone, other countries including Germany, China and the U.K. are experiencing slowdowns in manufacturing as well.

As a result, global trade is slowing. The World Trade Organization revised its expectations for 2019 to growth of 1.2% this year, far below the 2.6% estimate it issued in April and the weakest since 2009.  The WTO sees continued risks from the trade wars, and said that "further rounds of tariffs and retaliation could produce a destructive cycle of recrimination."

The transportation impact from slowing manufacturing activity can be seen in all modes. Year-to-date, air freight volumes are down 3.5%. IATA noted in its September report that 2019 could be the first year since 2009 that the global air freight market shrinks.

Despite some U.S. ports reporting record TEU volume, much of the volume can be attributed to empty containers. For example, for its fiscal year that ended June 30, 2019, 30.1% of total TEUs moved were empty for the Port of Los Angeles. Meanwhile, 19% of total TEUs moved at the Port of Savannah year-to-date through August have been empty.

Year-to-date contracted trucking volumes remain positive according to the American Trucking Associations, however, its August index, down 3.2% is concerning despite a 6.2% increase in July.  The index is up 4.3% year-to-date compared with the same period last year and represents the change in tonnage actually hauled by the fleets.

Rail volumes have struggled this year. For third quarter, the Association of American Railroads reported total carloads were down 5.6% year-over-year. For the second quarter, volumes were down 4.2% and 1.8% in the first quarter.

The result of declining volumes is capacity availability. However, there are attempts across all modes to remove capacity to maintain higher rates but the overall market demand is still keeping rates down and will do so for at least the rest of 2019.

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Weak Manufacturing Activity is Felt Across all Transportation Modes

October 3, 2019


The ISM manufacturing activity for September recorded the lowest reading in more than 10 years. Coming in at 47.8%, it was the second consecutive month of contraction. Any figure below 50% signals a contraction. Commentary from the monthly ISM survey:

  • “Incoming sales are sluggish for this time of year.” (Furniture & Related Products)
  • “Chinese tariffs going up are hurting our business. Most of the materials are not made in the U.S. and made only in China.” (Food, Beverage & Tobacco Products)
  • “Business outlook remains cautious. Orders seem to be decreasing, but luckily not as sharp of a decrease as we were expecting.” (Transportation Equipment)
ISM’s subsegment, new export orders, contracted for the third month in a row and had its lowest reading since March 2009. The U.S. is not alone, other countries including Germany, China and the U.K. are experiencing slowdowns in manufacturing as well. As a result, global trade is slowing. The World Trade Organization revised its expectations for 2019 to growth of 1.2% this year, far below the 2.6% estimate it issued in April and the weakest since 2009.  The WTO sees continued risks from the trade wars, and said that "further rounds of tariffs and retaliation could produce a destructive cycle of recrimination." The transportation impact from slowing manufacturing activity can be seen in all modes. Year-to-date, air freight volumes are down 3.5%. IATA noted in its September report that 2019 could be the first year since 2009 that the global air freight market shrinks. Despite some U.S. ports reporting record TEU volume, much of the volume can be attributed to empty containers. For example, for its fiscal year that ended June 30, 2019, 30.1% of total TEUs moved were empty for the Port of Los Angeles. Meanwhile, 19% of total TEUs moved at the Port of Savannah year-to-date through August have been empty. Year-to-date contracted trucking volumes remain positive according to the American Trucking Associations, however, its August index, down 3.2% is concerning despite a 6.2% increase in July.  The index is up 4.3% year-to-date compared with the same period last year and represents the change in tonnage actually hauled by the fleets. Rail volumes have struggled this year. For third quarter, the Association of American Railroads reported total carloads were down 5.6% year-over-year. For the second quarter, volumes were down 4.2% and 1.8% in the first quarter. The result of declining volumes is capacity availability. However, there are attempts across all modes to remove capacity to maintain higher rates but the overall market demand is still keeping rates down and will do so for at least the rest of 2019.

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