Overall

Hurricane Ida will impact the end-of-month push, and Labor Day and a four-day workweek are right around the corner.

Next Tuesday (Sept. 7) should be relatively open from a capacity standpoint, followed by a tight Wednesday and the remaining week carrying dislocation. Don’t anticipate much slowdown, if any, until that following Monday, Sept. 13. Any relief is likely to continue only through Sept. 23 before the end-of-month and end-of-quarter demands emerge again.

Enter peak season, which should come ripe with demand, especially for power-onlys, expedited runs (teams will get scarce), drayage and in final mile. Despite supply-side shortages and mounting disruption, we’re bullish on demand through the remainder of 2021 into 2022 as demand fundamentals continue to be positive.

Disruption

We have an active hurricane, resurgent COVID (Delta variant), port congestion and container shortages/dislocation, infrastructure bill negotiations, and China’s COVID shutdowns and labor shortages. Predicting this market is challenging, but when it all boils down, transportation demand continues to outpace capacity supply.

Economy & Demand

U.S. household income jumped in July as spending growth slowed. Economists think the COVID-19 Delta variant held back spending growth; expanded child tax credit boosted households as savings remains high.

Personal spend (PCE) increased a modest 0.3% month over month in July, marking the fifth spend increase in the same number of months. This has been primarily driven by services spend as opposed to spending on goods. Personal income grew 1.1% month over month, largely fueled by governmental social benefits and compensation. The household/personal savings rate grew to 9.6% in July, up from 8.8% in June. More detail is available in the Bureau of Economic Analysis Income & Outlays release highlights.

Macroeconomic Indicators

Click index reports to access trend charts.
Capacity

Tender rejections continue to increase. Tender volumes remain high.

Drivers and Hiring

According to Stephens Inc. analysis, “this remains the most challenging driver market that the industry has ever seen … the fleets of the public truckload (TL) carriers have decreased sequentially for the past eight quarters and are now collectively down 7% vs. 2Q19 levels. ... While multiple rounds of wage increases over the past year helped to reduce turnover, carriers continue to struggle to find new drivers to seat trucks to keep fleet count stable, much less fleet growth.”

• “To the degree that capacity in the TL market remains tight (which we believe will be the case well into 2022) TL carriers will continue to have pricing power with carriers (something that did not happen in the second year of the last two freight cycle recoveries). In addition, we believe an undersupplied truckload market will support elevated demand for the LTL and brokerage markets.”

Less-than-Truckload

After a big July, LTL demand has begun to normalize this month. This shouldn’t be taken as a larger breakdown of demand, but more correlated to the numerous embargoes and capacity restrictions implemented earlier this summer.

Hurricane IDA: Most of New Orleans is currently without power. Several carrier terminals in the Southeast are closed or have limited operations. Customers with shipments arriving or departing from the affected areas should expect delays.

Among embargoes announced Monday:

• SAIA: Full terminal embargo on Baton Rouge (BTR), Houma (HMA) and New Orleans (NOL).

• FedEx Freight: Effective Sunday, August 29, no pickup and delivery operations in the following. Visit FedEx Freight’s Service Delays and Regulatory Updates page for additional details.

• Lafayette, LA (LFT)

• Baton Rouge, LA (BTR)

• New Orleans, LA (NOL)

• Alexandria, LA (ALX)

• Monroe, LA (MRO)

• Hattiesburg, MS (HBG)

• Jackson, MS (JKM)

• Meridian, MS (MER)

• Mobile, AL (MOB)

Effective Monday, August 30, Southeastern Freight Lines lifted several origins and destination embargoes.

• Origins Lifted: 226, 228, 229, 244 | 350, 351, 352, 354, 359, 369, 370, 371, 372, 384, 385

• Destinations Lifted: 226, 228, 229, 244 | 370, 371, 372, 384, 85 | 700, 701, 703, 704

Parcel

In a GXO survey 36% of retailers noted that online returns have increased over the past 12 months, while 37% of retailers reported that returns have increased their operational costs.

Retailer American Eagle Outfitters acquired logistics startup AirTerra. “We have already made tremendous strides in our efforts to increase speed, resiliency and diversification; yet believe we have an incredible opportunity before us to become even faster, more agile and more efficient,” AEO Chief Supply Chain Officer Shekar Natarajan, told Insider. “The acquisition of a leading logistics business, AirTerra, and the deep experience its leadership team brings, only further fuels our excitement in the pursuit to provide a differentiated, best-in-industry experience for our customer.”

Transportation Insight Parcel President John Haber spoke with Jeff Berman from Logistics Management magazine to discuss the holiday peak season, particularly major capacity concerns. Access a summary and a link to the podcast here.

Retailer commentary from quarterly earnings:

• Big Lots: We were impacted by labor challenges in two of our regional distribution centers. This dynamic is improving as we enter Q3 and stress on our network will be further reduced by the opening of our first two forward distribution centers. In addition to alleviate immediate supply chain pressures and maintain speed to market, we have set up a nimble and agile temporary DC bypass program for the fourth quarter that will increase efficiency of our DCs and capacity to our network.

• Dollar Tree: We are prioritizing containers based on seasonality, the margin impact, and our overall inventory needs. We will be continuing to pull forward seasonal purchases by 30 days. We’re optimizing which China and U.S. ports we use to take advantage of the shipping availability and our operations team is delivering shrink improvements through technology-enhanced processes and disciplined execution.

• Express: We feel good about the composition of our inventory. It’s not going to be perfect heading into the holiday season, but we feel good about it. And also with these actions, we do feel good about the level of inventory we’re going to have heading into November and December. That being said, there is about a $15 million impact primarily in Q4 related to these logistics actions that we have taken.