As retail tonnage continues to converge to last year’s levels, there is a growing agreement that the retail party is coming to an end. Associate Professor Jason Miller of Michigan State University (MSU) says:
“My view is that many people believed that after the COVID-19 ‘jump,’ e-commerce sales would continue on the same 14 percent year-over-year increasing trajectory that we saw before COVID. That is almost certainly not going to happen, particularly once Delta has been contained.”
The fact that most brick-and-mortar merchants’ e-commerce sales in Q2 2021 were lower than in Q2 2020 (see chart below) has major ramifications for carriers looking to expand middle-mile e-commerce freight.
The Retail Truck Tonnage Index was produced by MSU’s Jason Miller and Yemisi Bolumole, Ph.D., and converts retail sales for all sectors — except fuel stations and motor vehicle and parts dealers — to sector-specific tonnage. According to the July Index, tonnage declined by 0.15 percent last month. Retail tonnage is up 2.5 percent this year compared to July 2020. Tonnage is up 14.5 percent from July of this year.
Professor Miller discussed why the retail purchasing spree of the last 18 months is starting to slow on last week’s DAT iQ Weekly Market Update.
“A lot of us predicted that after the stimulus money ran out, we’d start witnessing a shift away from physical commodities and toward services, which would diminish overall demand for truckload carriers,” Miller said. “And while we’ve seen glimpses of it happening, the main difficulty right now is that industrial supply chains, whether in automotive, furniture or to some extent wood products, are currently clogged. I’m not sure if the industrial sector will be able to pick up some of the slack.”
Miller backed this up with data from the Bureau of Economic Analysis, which showed that personal savings (personal savings as a percentage of disposable personal income) were at 9.4% in June, the lowest level since the pandemic began. Prior to COVID, the long-term average for personal savings was 8%, but it soared to 30% during the worst of the lockdowns last year.
“As we’ve seen, personal savings rates are essentially returning to their long-term trend, and personal income is declining now that the stimulus package has been depleted,” Miller said.
Continuous supply disruptions in the manufacturing sector should be the most troubling for carriers and brokers looking at where truckload demand is headed. Manufacturing accounted for 58.6 percent of ton-mileage in the for-hire truck transportation sector, according to the latest Commodity Flow Survey and analysis by MSU.
The retail e-commerce industry will continue to dominate the news. However, it’s vital to remember that the majority of small carriers, which make up the majority of the business, remain strongly reliant on manufacturing activities.
