Pay Attention to Freight

I will again recommend you subscribe to the Cass Freight Index email.  It is a free subscription and a tremendous source of information on the economy.  From the latest issue: 

For carriers, revenue per shipment (simply the expenditures index divided by shipments) trends have reversed and are increasing due to rising trucking rates, as there are real constraints on driver and industry supply presently. We don’t see much capacity entering or returning the rest of the year, so as supply/demand remains tight, expect continued growth in the average freight bill. (Emphasis added)

I have espoused enough on inflation.  Every good we purchase is transported to us.  We have all been spoiled by “free shipping,” especially during the pandemic.  There is a cost associated with moving goods and it is going up.  Therefore, the cost of goods is going up at some point (and Amazon will again raise its Prime membership fee). 

As the Cass report indicates, freight volumes are going up.  That is a positive sign for the economy.   The report also notes that an “inventory dump” is occurring on the West Coast.  If businesses have learned one thing during this pandemic is just in time inventory does not work when shutdowns occur.  I am sure there are a slew of consultants promulgating the value of safety stock and providing executives with fancy spreadsheets that show the cost of inventory vs. the cost of a lost sale.  The inventory build will continue.  That trend, along with supply constraints, will support the trend of rising freight rates. 

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