You think the economy is strong? You think that the Fed needs to hike again? Then go listen to last night's conference call from the second-largest trucking company in the country. You won't feel the same way. You will feel that the December rate hike needs to be rolled back or the President of the United States may not be so wrong in his criticism of the Fed.
John Roberts, the CEO of J.B. Hunt Transportation Services (JBHT) , didn't mince words when he told the story of the quarter -- saying what had been the hottest business -- intermodal, the railroad handoff -- had cooled, noting the ''volume, or lack thereof, is obviously the main story."
January was outright weaker, and February got hurt by the weather. But he said, "When the service began to improve, we did not see a snap back in customer demand in March, which was our biggest surprise and frankly missed our expectations."
How bad? Get this: January volumes down 7, February down 6 and March off 7. How 's April: "We are still waiting for customer demand to accelerate."
Not only that, but there has been "aggressive" pricing to get business. Prices are going negative in the bid season and the company expects them to be negative for the full year.
What happened? Among many things, Roberts said the potential tariffs heightened the concern and when they didn't go through, there was too much inventory in the system.
"Warehouses are full," Terence Mathews, head of intermodal, pointed out. "The sales-to-inventory ratio has crept up a little bit" again, because of the worries about March 1 tariff increases that didn't occur. "I think they need to bleed off some inventory" before things can normalize.
How about the driver shortage? Consider it over. The company said that there were still a lack of drivers in the Northeast, Ohio, Chicago and Northern California, where they still have to give extra incentives. But the rest of the country? Not a problem. In fact, potential wage reductions came up on the call, with the company saying that they aren't ready yet to put them through. Given how pricing is now "very aggressive," the company points out, something may have to give.
I bet what gives is driver salaries, because beginning in the second half of the year you are going to see Uber Freight kick in where drivers can go on their cellphones and see what routes are available. It matters, because ever since the Federal Motor Carrier Safety Administration put strict limits on hours driven, the driver shortage has been endemic. Now when there is a route to run that can't be filled traditionally, contract drivers found on Uber will take up the slack, putting further pressure on wages.
Trucking is a huge tell of the real economy, which has definitely slowed. This is the kind of call I listened to that Jerome Powell didn't.
What else does it say? When you listen to the consumer products story, you are not going to hear so much about freight. You can bet that freight prices are coming down and margins are going to expand.
To me, freight was the wild card in inflation. It's been soaring for two years of economic growth.
Consider that, and this chapter of inflation, now over.