I viewed an interview featuring billionaire Warren Buffet where he was asked about which indicators he monitored to gauge the current state of the economy. His response was that he continuously monitors the amount of freight volumes among the various railroads. Mr. Buffet believes that the state of economic health is best gauged by logistics and movement of goods. A wise sage!
This week featured a good sampling of major U.S. transportation carrier reports so I decided to assess the operational numbers that were reported. They all point to and reinforce a consistent trend- volumes may have hit bottom, but the economy is still nowhere near recovery in output of goods.
Here’s the summary of recently reported Quarter 2 highlights:
|
Carrier |
Revenue | Earnings |
Volume |
| Burlington Northern | Down 26% | Up 15% | Down 19% |
| CSX | Down 25% | Down 20% | Down 23% |
| Union Pacific | Down 28% | Down 12% | Down 22% |
| UPS | Down 17% | Down 49% | Domestic down 4.7% International down 7.3% |
In terms of commentary, Burlington Northern cited major volume declines in consumer goods (down 34%), autos (down 43%). CSX noted that volumes were significantly down in metals and forest products, and was particularly concerned about recent declines in coal shipments. Burlington Northern, Union Pacific and UPS together commented that previous declines in freight volumes were stabilizing, but each were not optimistic as to when any sense of “normal” shipment volumes would return. To give readers a sense of the state of small business, the reported UPS package volumes indicate an average reduction of 110,000 per day from a year ago, or roughly 6.6 million packages on a quarterly basis. That’s unused capacity that UPS had in place a year ago.
So if we use the “Buffet gauge”, the U.S. economy is probably bottoming, but recovery remains months away as basic industries await improving demand from customers.
International readers of Supply Chain Matters are welcomed to share commentary regarding unit volumes from their major country carriers.
It is insightful to know that the sage of Omaha uses transportation metrics as a KPI for the Economy. However, according to a recent ASCE Infrastrucutre report card, all the major transportation modes have received less than stellar grades
Bridges – D, Inland Waterways – D-, Rail – C- and Roads D
Moreover, according to the Annual State of Logistics Report released by the CSCMP, less than 22 billion dollars is allocated for freight transportation.
In my opinion, we should have exploited the economic downturn to slowly shift gears from trucking to intermodal (rail, waterways) and also invest heavily in the use of natural gas in trucking.
Now that the economy is slowly on the brink of recovery, I somehow get the feeling nothing tangible has been done.
I would like to know your thoughts on this and how we could and should transform logistics transport going forward.
Manik,
Thanks for your comments.
I absolutely agree that the U.S. should be investing in a more strategic deployment of transportation capabilities, and I have penned some other posts on this blog that address these perspectives.
Sadly, there seems to be other priorities for the legislative budget, priorities that seem to be driven more by lobbyists and insiders. I’ve also been a bit frustrated by the lack of visbile leadership from the U.S. Department of Transportation, as well as industry leaders. While the major transportation carriers (surface, rail and air) have been visible in support of alternative energy and green strategies, the internal industry-wide politics remain.
Bob Ferrari