Except for the discovery of the Higgs boson (or something that looks like it), this was a very quiet week for news. So, let’s get right to it:
- FedEx Strengthens Position in Brazil with Acquisition of Rapidão Cometa
- UPS Freight Announces 2012 Rate Adjustment
- Manufacturing shrinks, first time in nearly three years (Reuters)
- “Stagnant” economy takes toll on U.S. retailers’ June sales (Reuters)
- Cass Freight Index Report June 2012
- US Accuses China Over Duties on Auto Exports (ABC News)
After an initial announcement back in May, FedEx completed its acquisition of Rapidão Cometa this week. According to the press release, this acquisition “bolsters the FedEx Express portfolio with direct access to nationwide domestic services within Brazil and a domestic ground network of 45 branches and approximately 145 distribution points, 770 vehicles and trailers, and 9,000 team members across the country.” Rapidão Cometa had revenues of over $500 million in 2011.
In recent weeks, FedEx Freight, Con-way Freight, and ABF have announced General Rate Increases (GRIs). And now add UPS Freight to the list. The company announced a general rate increase averaging 5.9 percent “covering non-contractual shipments in the United States, Canada and Mexico. The rate adjustment takes effect on July 16, 2012, and applies to minimum charge, LTL rates and accessorial charges.”
June was not the best month for the manufacturing and retail sectors. According to the Institute for Supply Management (ISM), the manufacturing sector contracted in June for the first time since July 2009. Here is an excerpt from the press release:
“The PMI registered 49.7 percent, a decrease of 3.8 percentage points from May’s reading of 53.5 percent, indicating contraction in the manufacturing sector for the first time since July 2009, when the PMI registered 49.2 percent. The New Orders Index dropped 12.3 percentage points in June, registering 47.8 percent and indicating contraction in new orders for the first time since April 2009, when the New Orders Index registered 46.8 percent.”
Meanwhile, many retailers reported disappointing sales in June, including Costco, Macy’s, Kohl’s, and Target. According to a Reuters report, “Sales for the 20 chains in the Thomson Reuters I/B/E/S same-store sales index rose 0.1 percent, below the 0.5 percent analysts expected, and well below the 6.7 percent pace a year earlier.” The best performers were high-end retailers like Saks and Nordstrom that cater to affluent shoppers, and lower-priced retailers like TJ Maxx and Ross Stores, “as shoppers looked for deals on designer-brand clothes and home goods.”
This is all having an impact on freight volumes and spending, as the Cass Freight Index Report for June indicates:
The trend in North American freight volumes continues to follow the path of general malaise that the economy is experiencing. The number of freight shipments in June was up a scant 1.3 percent from the previous month, while at the same time total freight costs declined 0.1 percent. The economy has been flat for several months and is even beginning to trend downward in terms of new orders and manufacturing output. This slowdown on manufactured goods is putting downward pressure on freight. Calendar year‐to‐ date figures show growth for the first half of the year: 9.9 percent on shipment volume and 7.7 percent on total freight expenditures. But compared to the same period a year ago, 2012 growth is significantly slower, as shipment volumes in 2011 were up 15.5 percent from 2010.
Finally, the chess game (or is it a boxing match?) between the US and China over trade issues intensified yet again this week, with the US filing a complaint with the World Trade Organization (WTO) over China’s import duties on US cars. This was the seventh WTO case the US has brought against China. According to a Wall Street Journal article:
The U.S.’s latest move is in response to duties China imposed in December on U.S.-produced cars and SUVs with an engine capacity of at least 2.5 liters, which covers most vehicles midsize and larger. China has accused U.S. auto makers of dumping, or selling cars in China at below fair value, and is levying import tariffs of as much as 21.5%. It also has imposed duties of as much as 12.9% in retaliation for alleged unfair government subsidies. The duties could add thousands of dollars to the price of a car.
And so begins the second half of 2012. Let’s see where the road ahead takes us.
Have a great weekend!