DC Velocity - December 2011

newsworthy

of debt-strapped Europe rose 9 percent in the quarter compared with the same period a year ago, Davis said.

CLOSE TO THE BONE

Davis added that retail inventories in the United States are so lean at this point—the ratio of inventories to sales is at its second-lowest level since the government began keeping records—that even an incremental pickup in consumer demand heading into the holidays would be a significant boost for UPS and the economy as a whole. UPS moves the equivalent of 6 percent of the U.S. gross domestic product (GDP). The government reported Oct. 27 that third-quarter GDP had risen 2. 5 percent.

Jim Young, chairman and CEO of Union Pacific Corp.,
echoed Davis’s comments, noting that inventory ratios “are
as low as they’ve ever been.”
For his part, Davis said UPS would not know if the U.S.
consumer has a buying pulse until mid-December, a reflec-
tion of how late and compressed this year’s peak season is
expected to be, if there is a peak at all. Meanwhile, the com-
pany has cut air-freight capacity from Asia to the United
States by 10 percent due to slowing Asian export volumes.

William D. Greene, lead transport analyst at Morgan Stanley & Co., said the change in UPS’s public tone was

Averitt Express was recently honored with the 2010 LTL Carrier of the Year Award by Parker Hannifin, a manufacturer of motion and control technologies. … Manhattan Associates Inc. has won an award for the Best IT Project from the China Federation of Logistics and Purchasing for the second consecutive year. Manhattan Associates was honored for the deployment of its Distribution Management solutions for Sinopharm, China’s largest pharmaceuticals distributor. … England Logistics Inc., a third-party logistics service provider, was recognized as Utah’s sixth top revenue-growth company and one of the top 100 fastest-grow-ing companies by the non-profit organization Mountain West Capital Network. … Choptank Transport, a full-service logistics provider in Preston, Md., was named Best Broker of the Year – 2011 by the National Association of Small Trucking Companies (NASTC) at its annual conference in Nashville, Tenn. … Total Quality Logistics has been named by the Cincinnati Business Courier as a Best Places to Work winner for the 1,000+ employee category. … Ceva Logistics, a global supply chain management company, was named Best 3PL Supply Chain Provider at the 2011 CHaINA Awards organized by the Global Supply Chain Council. accolades

go figure …

20,000

The estimated number of comments filed with the Federal Motor Carrier Safety Administration in response to FMCSA’s proposal to change truck driver hours-of-service rules.

SOURCE: NATIONAL INDUSTRIAL TRANSPORTATION LEAGUE

“particularly bullish.” Greene acknowledged that UPS only offered an “incrementally more positive outlook” on the U.S. economy. Still, given how bearish its stance was just a few weeks ago, even a moderate change in UPS’s view bodes well for the transport sector because of its “size and status as an industry bellwether,” Greene wrote in a research note.

HOLDING ITS OWN

Analysts believe the trucking industry will hold its own through the sluggishness. In 2006, truckers entered what would become an ugly freight recession with significant overcapacity, and as a result were at the mercy of shippers for an extended period of time. Today, truckers— less-than-truckload carriers, in particular—operate in a much leaner fashion. In the past year, pricing has become more rational and, with capacity tightening, carriers are shedding marginally priced freight and imposing rate increases that are, for the most part, sticking.

John G. Larkin, managing director and lead transport analyst at Baltimore-based Stifel, Nicolaus & Co., said feedback from privately held companies—who Larkin said are the most accurate barometer of the industry climate because they don’t have to worry about public backlash— has revealed a “disconnect” between their views of business conditions and what the prevailing wisdom holds.

Based on their comments, Larkin said that “freight vol-
umes, at least relative to downsized capacity levels, are look-
ing rather good at the moment. The sky is not falling.”
Larkin predicted the U.S. economy would grow at a 1- to
2-percent rate through the 2012 elections. “Slow growth is
probably the best we can hope for, and I would not rule out
a mild double-dip recession. But it would be mild due to
the [leanness of] inventories,” he said.

Few analysts expect a return to recession, mostly because the U.S. economy remains mired in a post-recession funk and never generated much of a recovery to fall back from.

“You can’t fall 20 feet from a four-foot stepladder,” Thom S. Albrecht, transport analyst for BB&T Capital Markets, said at a recent industry conference. ;