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February 17 2020

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24 The Journal of Commerce | Februar y 17 2020 First-Quarter Trucking Outlook Special Report THE US MANUFACTURING sector, according to many reports, is in bad shape. But signs of a recovery, albeit a weak one, are beginning to add up, and that could mean a stronger-than-expected spring freight shipping season, both for domestic truck shipments and export freight. That would be good news for shippers and motor carriers, less-than- truckload (LTL) carriers in particular. LTL operators typically are more reliant on industrial freight than their truckload counterparts, and they saw volumes drop in 2019 as manufac- turing fell into a months-long slump viewed by some as a sector recession and by others as a "soft patch." Underscoring the close — but often overlooked — relationship between US manufacturing and transportation, the downturn had an immediate effect on trucking, which despite the rapid growth of e-commerce shipments is still heavily dependent on industrial freight, from finished products to palletized parts. The excess truck capacity, short- fall in LTL volume, and depressed truckload rates of 2019 can in part be attributed to the decline in manufac- turing and industrial output. When it comes to the economy, "Shippers and carriers are in align- ment; they both wish things were better," said Paul Bingham, director of transportation consulting in the Economics and Country Risk unit of IHS Markit, the parent company of The Journal of Commerce. "Shippers would probably be happy to be paying slightly higher trucking rates if they were selling more and shipping more." They may get their wish. US manufacturing output rose 0.2 percent in December, according to data from the US Federal Reserve. Unlike the Institute for Supply Man- agement (ISM), IHS Markit analysts believe the manufacturing sector hit bottom last summer. US rail chemical shipments rose 3.1 percent in early January after slipping 0.6 percent in 2019. New business at manufacturers is fueling an upturn in production, IHS Markit said in its December US purchasing managers index (PMI) report. The ISM PMI dropped to 47.2 in December, while the IHS Markit US PMI reading was 52.4. Any number above 50 indicates expansion, in this case, "modest improvement," IHS Markit said in its report. "The final quarterly average of 2019 was in fact the strongest since the opening three months of the year," IHS Markit said. New business "grew at a solid rate," the report said, thanks to the acquisition of new cli- ents and reviving exports sales, even if gains in orders were "marginal." The overall expansion rate was lower than in Dec. 2018, however, accord- ing to the report. Springing hopes US manufacturing upturn may boost spring freight volumes, truck rates By William B. Cassidy -25% -20% -15% -10% -5% 0% 5% 10% 15% 20% Dec- 18 Jan- 19 Feb-19 Mar-19 Apr-19 May- 19 Jun- 19 Jul-19 Aug- 19 Sep- 19 Oct-19 Nov- 19 Dec- 19 Jan- 20 Chemical carloads North American rail chemical shipments pick up in early 2020 Source: Association of American Railroads © 2020 IHS Markit Year-over-year percentage change of North American rail chemical carloads

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