This Week in SCDigest

Another view of US manufacturing strength is the index on output for US factories from the Federal Reserve.

As can be seen from the chart below, US manufacturing output has been flatish for many years now, and in general was been up modestly most months in 2018, though lately increasing.

With a score of a strong 106.2 in December, US manufacturing output was still just 6.2% above the average month in the baseline year of 2012, indicating very weak annual growth of less than 1% in the six years since.

What's more, as can also be seen in the chart, that also means 2018 output remains well below the peak year of 2007, when the index reached an historic high of 110.0 in December.

Oil prices had an interesting interesting year. WTI prices started rising in July of 2017, and as can be seen below and kept rising from the start of the year into September, when it hit $75/barrel, with some predicting $100 soon. But the bottom fell out right after that, with WTI down 31% from the start to the end of the year.

US diesel prices showed lest volatility, starting the year at $2.97 and then staying within about 30-40 cents of that price before reaching a high of $3.39 in October. But diesel prices ended the year about where they started, at $3.04.

Commodity and input prices were generally up for most of 2018, with talk that inflation was re-entering the supply chain. The ISM Prices index was up for the 34th straight month in December, though the rate of increase was slowing as the year ended.

Freight volumes all told were very strong though perhaps slowing as we ended the year. the ATA Freight Tonnage Index was up 6.6% for the full year, the largest annual increase since 1998 and double the 3.7% increase in 2017. However, freight volumes were down 4.3% in December versus November.

Rising volumes plus the driver shortage naturally pushed truckload rates higher - much higher. The Cass truckload Linehaul Index,which tracks truckload rates, was up 6.5% year-over-year every month of 2018, and up more than 9% May through September. It ended the year up a robust 7.2% in December.

It was again decent year for the railroads. Total US carload traffic for 2018 was up 1.8%, while intermodal traffic up 5.5%. Combined rail volumes were up 3.7%.

In terms of ocean container carriers. The China Containerized Freight Index started the year at about 825 (versus 1000 in the baseline rate in November, 2012), and in general rose slowly for most of the year, though not enough to deliver strong profitability to container carriers. The index ended the year a little above where it started.

The WTO recently projected that the volume global trade was up 3.9% last year, down from 4.2% in 2017, and right around global GDP growth. Not long ago, trade far exceeded GDP growth. It estimates a lower 3.7% trade growth in 2019.

The US trade deficit continued along, coming in at generally over $50 billion each month, up from $45-50 billion in 2017 but down from about $60 billion per month pre-recession. The trade deficit in goods with China also stayed strong, again setting a record despite tariffs at what I estimate as $424 billion for the year, in the absence of recent month data from the Census Bureau. The cumulative US trade deficit with China since 2000 is an incredible $4.8 trillion, as shown in the chart below.

The growth of ecommerce sales in the US also rolled on, up 16.3%, 14.9%, and 14.5% in Q1 through Q3, respectively. Ecommerce represented 9.8% of total retail sales in Q3, by the government's calculation, but the way SCDigest figures it, the share is now over 11%. Total retail sales were up a a strong 5.0% or so in 2018, but ecommerce continues to rapidly gain share.

Amazon's overall revenues through Q3 up 37% to an incredible $160.5 billion, meaning full year 2018 sales will be close to an "Amazonazing " $200 billion when reported soon.

Amazon on-lines store sales though Q3, however, were up just 10%. But Amazon saw 31% growth in services, which includes its marketplace, fulfillment by Amazon, and web services. Amazon had record profits through Q3 of $7billion, versus $1.95 billion in 2017. It employes 613,000 people.

I have lots more but am out of space. Hope you enjoyed all this.

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