DC Velocity - December 2018

newsworthy

THE ECONOMIC OUTLOOK FOR 2019 REMAINS POSITIVE, BUT TRANSportation and logistics professionals should prepare to manage some growing supply chain risks in the year ahead, economist Jason Schenker told attendees at a transportation industry technology conference in Dallas.

Schenker predicted moderating economic growth ahead, pointing to continued strength in U.S. and European manufacturing markets coupled with a slowing manufacturing economy in China. Here at home, logistics and transportation providers should keep a close watch on tariffs, labor-related issues, and freight market volatility, among other challenges, he said in a keynote presentation at MarketWaves18, a conference hosted by logistics data and analytics provider FreightWaves. Schenker is president and chief economist of financial market research firm Prestige Economics.

The ongoing trade war between the U.S. and China poses one of the greatest risks to the economy, and Schenker said the situation “may not unwind very quickly” in 2019. Conditions are likely to fuel freight market volatility heading into the new year, he added, especially as companies increase imports ahead of tariffs on Chinese goods set to take effect in January, raising the risk of a dropoff in imports in the first quarter.

Schenker pointed to U.S. monetary policy as another risk ahead, noting that he expects the Federal Reserve to raise rates twice over the next six months, potentially sometime this month and then again during the first quarter. He added that the tight labor market will continue in 2019, putting pressure on labor costs.

Although the challenges ahead point to a slowdown in certain sectors, including automotive, construction, metals, and mining, Schenker said he expects consumer markets, e-commerce, nondurable goods, and the industrial technology sectors to continue to perform well in the new year.

Other recent economic data reinforce Schenker’s findings. The Conference Board’s latest Global Economic Outlook, released Nov. 13, predicts 3.1-percent economic growth next year, down from 3. 2 percent in 2018. U.S. economic expansion will likely peak in the next few months, the study authors said, as the effects of tax cuts and fiscal spending wane during the course of 2019.

“The global economy will remain strong through the next half year—with no signs of a downturn—assuming there are no major policy disruptions such as a widespread escalation in tariffs on trade,” Bart van Ark, executive vice president and chief economist at The Conference Board said in a statement announcing the findings. “But business cycles are maturing in most economies, and growth rates are gradually reverting to slower trends in the medium-term. Looking beyond 2019, the main concerns are slower growth of labor supply and modest projections of productivity growth.”

—Victoria Kickham

Economic outlook calls for risk

Grocery shoppers in Cincinnati will soon be able to order their fruits and veggies online, thanks to a highly automated warehouse planned by the supermarket chain Kroger Co. and its automation partner, Ocado Group plc, the firms said.

Cincinnati-based Kroger announced in October that it had agreed to order three of Ocado’s customer fulfillment centers (CFCs) by the end of 2018 and a total of 20 CFCs over the first three years of the partnership.

Ocado, a British firm that operates an online grocery and general merchandise retail business of its own in the U.K., will develop those sites by installing mechanical handling equipment modules that perform automated storage and retrieval. Kroger owns a 6-per- cent stake in Ocado and the exclusive rights to use its technology in the U.S.

The first location for these automated warehouse facilities with digital and robotic capabilities—known as “sheds”— will be in Monroe, Ohio, a suburb north of Cincinnati, Kroger announced.

The deal is subject to Kroger’s securing state and local incentives, the firm said. Kroger did not detail the type or value of sweeteners it is seeking. However, the company said it would invest $55 million to build the first shed, which will measure 335,000 square feet and generate more than 410 new jobs.