Jason Miller, associate professor of logistics, Michigan State UniversityAug 03, 2022 10:52AM EDT
source : JOC.com (The Journal of Commerce)
Jason Miller, associate professor of logistics, Michigan State University
Aug 03, 2022 10:52AM EDT
source : JOC.com (The Journal of Commerce)

according to logistics expert Jason Miller. Photo credit: Shutterstock.com.
Below are five key insights for transportation providers to consider:
(1) Demand for goods continues to outpace pre-COVID-19 levels by a substantial amount. While seasonally adjusted and inflation-adjusted spending on goods declined 1.1 percent from the first quarter of 2022, demand for goods remained 4.9 percent above where the pre-COVID trendline estimated for 2017-2019 placed goods demand in Q2 2022. Real spending on goods was up 16.1 percent from Q2 2019. On a not seasonally adjusted basis, real spending on goods increased 6 percent in Q2 from Q1. Given this fact, coupled with the slow pace of decline in seasonally adjusted spending on goods since the peak in Q2 2021, it seems unlikely that demand will suddenly fall in the back half of 2022.
(2) While real imports of goods were flat on a seasonally adjusted basis in Q2 from Q1 (although they increased 5.3 percent on a not seasonally adjusted basis), they remain 8.5 percent above where the pre-COVID trendline placed them. Real imports were up 9.2 percent year over year and 16.2 percent from Q2 2019. Historically, when the year-over-year percent change in real imports approaches zero, there is either a recession (as in 2021 and 2008) or a freight recession (as in 2016 and 2019). Consequently, the fact imports remain this elevated on a year-over-year basis is not indicative that a recession is imminent.

(4) Despite the dollar being incredibly strong relative to other currencies, US exports increased 3.7 percent between Q2 2022 and Q1 2022. On a not seasonally adjusted basis, this increase was larger, at 5.1 percent. This suggests demand for American products despite the higher costs other nations are paying for imports.
(5) The seasonally adjusted cooldown in residential fixed investment needs to be put in context given the strength of the 2021 market coupled with the key role that seasonal adjustment plays for this series. On a seasonally adjusted basis, we saw a 3.7 percent decrease in Q2 from Q1, with the caveat that the not seasonally adjusted data increased by 17.2 percent, indicating the seasonal adjustment model expected an increase of 20.9 percent under standard seasonal conditions. Given this degree of seasonality, some caution is warranted in reading too much into this decline given the data will be revised. Furthermore, real private residential fixed investment is up 11.2 percent from Q2 2019.
Taken together, the more granular data that underlies the GDP statistic suggests demand for transportation services, both domestic and international, is unlikely to cool substantially as we move through the second half of 2022. Rather than falling off a cliff as some have foretold, it appears we are moving toward a phase where freight markets are normalizing after two years where nothing has been normal.