Good Tailwinds Continue
Overall: Key drivers of freight activity continue to be resilient, but a few cracks were showing in the data.
- Labor Market Remains Solid. Although the latest labor data had not been released at the time of writing, most measures in June and July show a low layoff environment, solid wage growth, significant job openings (7.2M), and some slightly improving consumer sentiment.
- Q2 GDP Was Odd. The headline GDP growth figure for Q2 came in weaker than expected at 1.5%. However, peeling back the layers of the onion, the detractors from GDP were a heavy import imbalance (which pulls away from GDP but creates freight volume) and weaker inventory building activity. Stripping those two components out, other categories of GDP (consumer spending, gross private investment, etc.) pushed growth well above 2.5% for the quarter. Said another way, the fundamentals that drive freight movement generally remained strong in Q2 despite what was a sluggish economic headline. Not to put too much stock in an early reading, but the preliminary Q3 GDP estimate is currently at 5.9% according to the Atlanta Federal Reserve.
- Conflict Risk is Different, But Still There. Daily swings in geopolitical headlines are still buffeting oil prices. But two trends have emerged. First, the global supply chain pressures that were warned about early on are now showing up in monthly manufacturing data. Secondly, consumer sentiment is improving, and investors are largely starting to ignore daily swings in conflict headlines.
Link to Full Edition: LTL Monthly Executive Briefing PDF
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