Five interesting things that Hodges Capital research analysts discovered this week...
#1 TRUCKING RATES: The Stephens TL Rate Index, which measures truckload revenue per loaded mile excluding fuel, was down 3% year-over-year in the first quarter of 2023. This year's sluggish freight demand primarily reflects less retailer import volume, resulting in overcapacity in the truckload market.
#2 FLAT BEER: The most recent Brewers Association's annual report indicated that 2022 craft beer production was flat at 24.3 million barrels, the first time the industry has not grown outside of the pandemic.
#3 TIMBER: Lumber futures fell to a new three-year low last week, down more than 75% from its previous high to a low of $345 per 1,000 board feet. In North America, above-average inventory supply has recently outpaced demand due to uncertainty in homebuilding.
#4 SOFT RAIL VOLUME: The association of American Railroad's traffic data indicated that U.S. railroad volume is down by more than 5% year-to-date, with the largest decreases coming from intermodal shipments, down more than 10%. Such volume declines in intermodal are consistent with a slowdown in consumer spending and higher retail inventories.
#5 INTEREST RATES & UNEMPLOYMENT: According to Strategas, interest rate cuts when unemployment is below 4% are historically rare. Since 1971, there have been 124 instances where the Fed Funds Rate has been lower, and only six of those cuts have occurred with an unemployment rate of less than 4%. Although the market is pricing in further rate cuts by the end of 2023, history suggests that it could be unlikely without a weakening in the labor market.
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