This week:
- Economists predict a rise in Asia imports as US economy recovers
- US manufacturing shows signs of recovery, good news for trucking sector
- US railroads ask for better communication with import shippers
- Californian freight sector urges regulators to give more time on zero-emission vehicle transition
- SEC passes its new Climate Disclosure Rule
Projections for Increased Asia-US Trade as US Economic Outlook Improves
US imports from Asia have been steadily increasing since October last year on a year-over-year basis, with February up by more than 30% compared to last year. The strong US import activity is largely attributed to US consumers experiencing high employment numbers, combined with record-high wages and a rising housing market.
The strong US economic outlook for 2024 can also be seen in S&P Global’s projection for US GDP, which was originally forecast at a growth rate of 1.7% this year but has now been lifted to 2.4%.
Strong consumer spending is not the only driving force behind recent US economic growth. S&P’s Global Manufacturing Purchasing Managers’ Index (PMI) reached an 18-month high last month, marking the first indication of manufacturing growth since August 2022.
Forecasts from the National Retail Federation’s (NRF) Global Port Tracker in the first week of March put US imports for the first half of 2024 7.8% higher than the same period last year. Just a month ago, the forecast for this period was 5.3%.
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Truck Shipments Increase off the Back of US Manufacturing and Consumer Goods
From January to February, the shipments component of the Cass Freight Index rose 7.3%, indicating a marked increase in freight demand for the middle of 2024’s first quarter. The index also showed a 4% increase in shipper spending on transportation from January to February, although February’s figure is 19.8% lower than last year’s and 27.6% lower than that of 2022.
Although the freight market is still slow to bounce back, there are signs that a resurgence is beginning after nearly two years of depressed activity. While last month’s activity was lower than the previous year’s, it was the smallest year-over-year drop in 10 months. Future projections from the Cass Index show 2024’s Q1 will see a 3% increase from last year’s Q4, with its annualized shipments index turning positive in May.
Numerous other PMIs point to a coming growth in trucking demand. S&P Global’s US Manufacturing PMI reached 52.2 last month after breaking the 50 threshold in January, the first time in 11 months. When the PMI goes over 50, it signals industry growth, which in turn drives trucking demand.
S&P Global’s Sector PMI, which measures growth across seven US business sectors, showed growth last month in every one of the measured sectors, with consumer spending seeing the largest increase. This is the first time since April 2022 that growth has been measured across all of the seven target sectors at once.
With the signs of improved economic activity and trucking demand building, economists are still warning that a coming economic uptick is largely dependent on lowered inflation rates and lowered interest rates.
Railroads Request Improved Communication with Shippers on Cargo Movements
While domestic intermodal shippers and railroads enjoy effective communication with each other to track and reposition shipments when necessary, railroads are asking for similar communication with shippers on their import loads. The communication breakdown for international intermodal business often occurs due to correspondence not making it past the ocean carriers, something which the railroads want help overcoming.
Enhanced communication and information sharing would have been invaluable during the pandemic’s supply chain chaos when railroads ran out of chassis while import containers were stacking up. Beth Whited, president of Union Pacific Railroad, said railroads are leaning on their ocean carrier partners to share more information on inland movements.
Unfortunately, not all ocean carriers are actively sharing information with railroads, creating dilemmas of how to best make inland moves. One option is the US Department of Transportation’s Freight Logistics Optimization Works (FLOW) initiative. Railroads have been reluctant to join FLOW, however, as they first want more information on what data will be shared and how confidential information will be protected.
Californian Freight Sectors Urge Regulators to Hold Off on Zero Emission Mandates
California’s various freight sectors are pushing for state regulators to give more time before implementing rules designed to reduce vehicle emissions around the state’s ports, railroads, and warehouses due to the large cost of changing to zero-emission vehicles.
To meet new regulatory frameworks outlined by the Environmental Protection Agency’s (EPA’s) Clean Air Act, all vehicles used by drayage operators and others in the state’s ports, railroads, and warehouses must transition to zero-emission trucks.
The main struggle for drayage operators and other freight professionals throughout the state is the cost, with many zero-emission trucks priced at over $400,000, three times that of the diesel equivalent. The California Air Resources Board (CARB), which is implementing the change through its Advanced Clean Fleets regulations, has acknowledged the freight industry’s concerns. However, CARB has also stated that large ports such as Los Angeles and San Francisco are on strict deadlines imposed by the EPA, so state regulators like CARB have no choice but to impose the new rules as instructed.
SEC Climate Disclosure Rule to Impact Manufacturer Supply Chains
The Securities and Exchange Commission (SEC) recently passed its Climate Disclosure Rule, which requires public companies to disclose climate-related risks relevant to their business practices in their SEC filings.
In the rule’s final version, the SEC will take a “phasing in” approach for businesses disclosing Scope 1 and Scope 2 emissions. The requirement for businesses to disclose Scope 3 emissions has been removed from the rule.
The rule will be phased in between 2026 and 2028, with large filers who have at least $700 million in publicly held investor shares starting first. With the finished version of the rule coming into effect over the next four years, manufacturers now have to develop their own internal strategies to stay compliant with the SEC once the rule takes effect.
Photo by Barrett Ward on Unsplash
