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Nov.16, 2015

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4 THE JOURNAL OF COMMERCE Editor's Letter Chris Brooks THERE MAY BE no better indicator of how shippers view the transporta- tion landscape than in how they see freight rates trending through next fall. At its core, that singular piece of data among reams of it in Wolfe Research's Third Quarter "State of the Freight" report is a microcosm of what's occurring in global and North American supply chains amid a lan- guishing Chinese economy whose pain is spreading globally. As Associate Editor Reynolds Hutchins dissects in this week's Cover Story, the 600 shippers who comprise the backbone of the report are decid- edly mixed in their outlook — a bit more optimistic on same-store ship- ment volumes than a quarter earlier, but more bearish on volume growth prospects for intermodal and domes- tic ground transportation than at anytime in more than three years. The rate expectations — slower acceleration in truckload, rail and intermodal, and outright declines, from already lower-than-normal bases, on the ocean and in the air — are indicative of the excess capacity available in much of the supply chain. For some, that's been a known entity for years — it's tough to go a day without hearing about the signifi cant overcapacity ocean carriers face as they introduce ever-larger vessels in the name of economic effi ciency. For others, it's a stark turnaround. Some 56 percent of shippers surveyed by Wolfe Research see overcapacity in the truckload market now, up from 19 percent a quarter ago and none at this time last year. It's also the highest perception of truckload overcapacity since early 2010, just as the U.S. was emerging from the Great Recession. And it tracks with what shippers are saying in public. "Capacity is ade- quate out there," Bradley Parkhurst, transportation sourcing leader at Owens Corning, told the JOC's Inland Distribution Conference in Memphis last month. "It's a different position than last year. I'm a little surprised." Candace Holowicki, director of global transportation and logistics at industrial manufacturer TriMas, likewise isn't having trouble getting equipment, but is aware how quickly that can change. "I wouldn't assume this will continue," she said. "We'll enjoy it while it's here, but next year we assume there will be more weather issues." And that's the crux of how ship- pers and their transportation pro- viders must go about their business, because the cycles of change are tighter than ever. As recently as sum- mer, the U.S. economy was humming along, growing 3.9 percent in the second quarter and gearing up for a big second half of 2015. GDP had expanded in 13 of the previous 14 quarters, with the brutal 2014 and 2015 winters the only blight over the past 2 ½ years. But then growth hit the brakes in the third quarter, slipping to 1.5 percent during one of the busi- est consumer periods of the year, the summer back-to-school buy- ing season. Another ominous sign: Manufacturing slipped for the fourth straight month in October, to 50.1 on the ISM Manufacturing Index, dan- gerously close to the sub-50 level that would indicate manufactur- ing contraction. That, coupled with China's troubles and a tepid economy seemingly everywhere but the U.S., is prompting whispers around the dreaded "R" word: Recession. For now, the prevailing view is that underlying factors point to con- tinued relative strength in the U.S. economy, and high inventory levels could be skewing both the manufac- turing and volume levels. But as the Wolfe Research report shows, and as other comments reveal, sentiment — and reality — can change in months, if not weeks. "If you're deciding whether to buy trucks and new equipment, this is a good time," Charles "Chuck" Clowdis, managing director of transportation for IHS Economics and Country Risk, told the SMC3 JumpStart 2015 Con- ference in January. "(But) be cautious in adding that equipment." Caution, it's now fair to say, is the new normal. JOC REALITY Check The Journal of Commerce (USPS 279 – 060), ISSN 1530-7557, November 16, 2015, Volume 16, Issue No. 23. The Journal of Commerce is published bi-weekly except the last week in December (printed 26 times per year) by JOC Group Inc. 2 Penn Plaza East, 12th Floor, Newark, N.J. 07105. Subscription price: $344 a year. Periodicals postage paid at Newark, N.J., and additional mailing offi ces. © All rights reserved. No portion of this publication may be copied or reprinted without written permission from the publisher. POSTMASTER: Please send address changes to The Journal of Commerce, Subscription Services Department, 2 Penn Plaza East, Floor 12, Newark, N.J. 07105-2257. NOVEMBER 16.2015 EXECUTIVE EDITOR, THE JOURNAL OF COMMERCE AND JOC EVENTS Chris Brooks 973.776.7818 MANAGING EDITOR Barbara Wyker 973.776.7817 EXECUTIVE EDITOR, JOC.COM Mark Szakonyi 202.872.1234 SENIOR EDITORS Joseph Bonney, Trans-Atlantic, East and Gulf Coast, Latin America 973.776.7809 William B. Cassidy, Trucking and Domestic Transportation 202.872.1228 Bill Mongelluzzo, Trans-Pacifi c 562.428.5999 Greg Knowler, Asia Editor, IHS Maritime & Trade +852 3975 2647 Turloch Mooney, Ports, IHS Maritime & Trade +852 9011 9109 ASSOCIATE EDITOR Reynolds Hutchins, Intermodal Rail and Government/Regulation 202.572.1487 EDITOR-AT-LARGE Peter T. Leach 212.755.0940 RESEARCH EDITOR Marsha Salisbury 973.776.7828 ASSISTANT WEB EDITOR Dustin Braden 973.776.8652 ECONOMIST Mario O. 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