Distribution and logistics - Analysis and Commentary - North America

DISTRIBUTION/LOGISTIC INDUSTRY –

NORTH AMERICABY: PAUL YOUNG, CPA, CGA

DATE: NOVEMBER 13, 2016

OVERVIEW

• This presentation what is happening with the logistics and distribution market. The focus will look at transportation and Warehousing. Logistics and Warehousing are key part of supply chain for many companies.

• The data included is the most recent data through November 13, 2016 as such some data may be lagging due to have the data is reported by business into various government agencies.

AGENDA

• Class 8 Truck Sales

• New Trailer Orders

• Freight Index

• NAFTA Freight

• US Ports

• Retail Sales/Canada

• Retail Sales/USA

CLASS 8 SALES – SEPTEMBER 2016

Source – The Trucker and Ward Automotive

October U.S. Class 8 truck sales dropped 29.3 percent from the same month last year, WardsAuto reported November 10, to a total of 13,618. The October total was 9 percent below the month before. Freightliner led all OEMs with 4,371 units sold, or 32.1 percent share, a 14.8 percent drop from last year.

NEW TRAILER ORDERS• New and net trailer orders significantly disappointed in September, conflicting with a seasonally-

anticipated double-digit gain, according to the most recent State of the Industry: U.S. Trailers published by ACT Research Co.

• Net orders posted were 12,993, marking the lowest volume since August 2010.

• “September’s weakness is further indication of fleet reticence toward equipment investment,” said Frank Maly, Director–CV transportation analysis and research at ACT. “The current environment of low freight rates and uneven freight volumes, along with over-capacity resulting from a long run of equipment purchases, is not conducive to short-term capex commitments.

Source - http://www.thetrucker.com/News/Story/TrailerordersinSeptemberhitlowestvolumein6years

FREIGHT INDEX

The September Freight TSI fell due to declines in trucking, pipeline and rail intermodal, while air freight, water, and rail carloads rose, BTS reported. The Federal Reserve Board Industrial Production index rose only 0.1 percent in September, though employment grew by 161,000 jobs and housing starts were 1.9 percent above the August level.

A 0.7 percent third quarter decrease matched slow growth in Industrial Production, which remained unchanged in the third quarter, while Gross Domestic Product (GDP) growth quickened to 2.9 percent in the third quarter, according to BTS. GDP growth in the second and third quarters outpaced the 1.5 percent growth of TSI over those two quarters, after two earlier quarters when GDP grew less than 1 percent and TSI declined

Source - http://www.thetrucker.com/News/Story/BTSOctoberTransportationServicesIndexoff06fromSeptember

NAFTA FREIGHT• For the first time since December 2014, North American Free Trade Agreement cross border freight increased in value from the same month in the previous

year, the U.S. Department of Transportation’s Bureau of Transportation Statistics (BTS) reported today. Two transportation modes – air and truck – carried more cross-border freight by value in August 2016 compared to August 2015, resulting in a 0.7 percent increase to $93.1 billion in the total current dollar value of freight moved.

• The value of commodities moving by air increased 4.9 percent while truck-delivered freight rose 3.4 percent in value. The value of freight carried on other modes decreased. Trucks carried 65.3 percent of U.S.-NAFTA freight and continued to be the most heavily utilized mode for moving goods to and from both U.S.-NAFTA partners. Trucks accounted for $31.2 billion of the $49.7 billion of imports (62.8 percent) and $29.6 billion of the $43.4 billion of exports (68.3 percent).

• Rail remained the second largest mode by valsurface transportation modes of truck, rail and pipeline carried 85.7 percent of the total value of U.S.-NAFTA freight flows.

• The total value of U.S.-Canada freight fell to $47.3 billion, down 1.4 percent from a year earlier, due to decreases in the value of goods moved by vessel and pipeline.

• Trucks carried 59.6 percent of the value of the freight to and from Canada. Rail carried 16.5 percent followed by pipeline, 9.0 percent; air, 4.7 percent; and vessel, 3.8 percent. The surface transportation modes of truck, rail and pipeline carried 85.1 percent of the value of total U.S.-Canada freight flows.   

• In August 2016, the top commodity category transported between the U.S. and Canada by all modes was vehicles and parts, of which $5.2 billion, or 55.1 percent, moved by truck and $4.0 billion, or 42.5 percent, moved by rail. The top commodity category transported between the U.S. and Mexico by all modes use, moving 15.3 percent of all U.S.-NAFTA freight, followed by vessel, 5.8 percent; pipeline, 5.1 percent; and air, 3.7 percent. The in August 2016 was electrical machinery, of which $7.4 billion, or 79.5 percent, moved by truck.

Source - http://www.thetrucker.com/News/Story/AugustNAFTAfreightup07from2015firstannualincreasesinceDecember2014

US PORTS• As merchants are busy getting ready for the holiday season, October is expected to be the second-busiest

month of the year, according to the monthly Global Port Tracker report released last week by the National Retail Federation and Hackett Associates.

“The holidays are nearly here, and from warehouses to store shelves, retailers are making sure they have the merchandise on hand to meet consumers’ demands,” NRF Vice President for Supply Chain and Customs Policy Jonathan Gold said.

• “November and December are the busiest time for holiday shopping, but this is the month for the behind-the-scenes supply chain work that ensures shoppers will find what they want, where they want it, when they want it,” Gold added.

Ports covered by Global Port Tracker handled 1.71 million Twenty-Foot Equivalent Units in August, the latest month for which after-the-fact numbers are available. That was up 5% from July and up 1.7% from August 2015, and has been the busiest month of the year thus far.

Source - http://mhlnews.com/transportation-distribution/stocking-holidays-boosts-october-imports

RETAIL SALES/INDUSTRY SEGMENT

Source: Stats Canada

RETAIL SALES/PROVINCE

Source: Stats Canada

ONLINE SALES/NORTH AMERICA - AMAZON

http://phx.corporate-ir.net/phoenix.zhtml?c=97664&p=irol-newsArticle&ID=2216758

The past quarter has been a busy one for Amazon, filled with development of new original series, the launch of a on-demand music streaming service, an updated version of its Echo Dot device powered by Alexa, the addition of more skills to the virtual assistant platform, the introdution of new games produced through Amazon Game Studios, a refreshed Prime Photos service, the launch of a Fire HD 8 tablet, and more.

Note:• Amazon continues moved forward with more

streaming options. • More and more people are using online retailers for

their purchases

Source - http://venturebeat.com/2016/10/27/amazons-q3-2016-sales-up-29-at-32-69-billion-but-stock-tanks-more-than-5/

RETAIL SALES/UNITED STATES

Source - https://www.census.gov/retail/marts/www/marts_current.pdf

WHAT’S NEXT• We are approaching Christmas season which commences on Black Friday. Retailers have been stocking up to meet

the pent up demand at Christmas time

• Retail sales have been sluggish this year, especially in Canada. The tax changes in Canada have not led to pent up demand. In fact many consumers used the changes in tax programs to either save money or pay down debt/Bills. FYI – If have policies like hydro driven by provinces - http://www.mindentimes.ca/rough-ride-for-rural-Ontario. The new carbon tax will also impact consumer spending - http://business.financialpost.com/fp-comment/jack-mintz-canadians-are-going-to-feel-a-lot-more-climate-policy-pain-than-just-the-trudeau-carbon-tax

• United States has elected a new president that is about making America strong again. The new president is likely going to look at policies that favor American business.

• China is struggling with business and personal debt. The debt levels could be a drag on the Chinese Economy - http://www.reuters.com/article/us-china-debt-household-idUSKBN1360OK

• Self-autonomous cars - https://www.wired.com/2016/10/ubers-self-driving-truck-makes-first-delivery-50000-beers/

Q&A

• For additional information and/or questions contact: Paul Young, CPA, CGA – [email protected]