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Economy Matters logo

About


The Atlanta Fed's SouthPoint offers commentary and observations on various aspects of the region's economy.

The blog's authors include staff from the Atlanta Fed's Regional Economic Information Network and Public Affairs Department.

Postings are weekly.


April 11, 2013

Is Transportation Feeling Sequestration’s Effects?

The Atlanta Fed’s Trade and Transportation Advisory Council recently convened at the Jacksonville Branch to discuss current economic conditions in the transportation sector. The conversation focused on various topics related to the movement of goods as well as on how fiscal tightening will impact the nation’s ports and airports.

A poll of the council members revealed that demand was slightly higher in the first quarter of 2013 for the majority of firms than it was for the same period in 2012. Most council members indicated that they are implementing price or rate increases whenever possible: trucking companies are able to assess fuel surcharges along with some nonfuel price increases as wage pressures mount for qualified and available truck drivers. Railroads continue to enjoy increases in intermodal volume as higher fuel prices drive some cargo from truck to rail. In ocean shipping, fuel costs are a percentage of the direct cost per load and thus have a material effect on the bottom line.

First-quarter 2013 employment levels were higher for a third of the council members than year-earlier levels, and half of the council members expect somewhat higher workforce levels over the next three to six months. The proportion of part-time/temporary workers has remained virtually unchanged. The majority of the council members are planning to increase the pace of capital spending; funding for capital expenditures comes from a variety of sources. Ports in particular are seeking more money from public-private partnerships.

The outlook for short-term growth by council members is less positive than it was the last time the Atlanta Fed conducted the poll, in October 2012. At that time, half expected higher growth for the next three to six months. Currently, just over one-third anticipate higher growth in the near term. However, looking out two to three years, nearly 90 percent are forecasting higher growth.

During the meeting, the council members were queried about the effects of sequestration on their industries, particularly as it relates to the furloughing of U.S. Customs and Border Protection (CBP) personnel. Members indicated that the expectation of air cargo and maritime shipping industries at the outset of sequestration was that the budget cuts would affect the ability of ports and airports to clear goods in a timely manner, which would impact perishables and just-in-time shipments. Sequestration originally called for customs agents’ overtime to be cut at ports all over the country, and in March, approximately 60,000 CBP agents received furlough notices.

Recently, there have been reports of delays impacting perishable imports at airports in the Sixth Federal Reserve District. The Miami Herald reported that imports of perishables such as flowers, fruits, vegetables, and fish are being threatened by slow cargo inspections resulting from cuts in overtime pay for customs officers. And as the flower industry gears up for one of its busiest days of the year—Mother’s Day—the potential for delays is concerning. About 90 percent of all flowers the United States imports arrive at Miami International Airport, where customs officers who specialize in perishable goods inspect them. Delayed inspections can result in the stems going bad or arriving too late to be transported across the country in refrigerated trucks. The millions of stems that come through Miami for Mother’s Day could be affected.

According to an April 3 American Shipper article, the CBP announced it was postponing plans to furlough employees after an enactment of a six-month budget for the remainder of fiscal year 2013. This appropriation gives the U.S. Department of Homeland Security more flexibility in implementing budget reductions by taking money out of other programs so as not to impact front-line personnel. This measure would provide some breathing room at ports and airports. In addition, alternative measures have been put in place, such as cross-training of inspectors and relying on private sector entities to fill in the gaps.

In addition to perishable imports, interruptions in passenger processing at airports are a concern—though these types of delays were problematic before sequestration. There have also been some reports of delays in the screening of passenger cruise ships. 

Despite these scattered reports of problems, however, the consensus of the Atlanta Fed Trade and Transportation Advisory Council members was that it is still early, and the long-term effects from fiscal tightening on cargo and travelers cannot yet be fully determined.

A look at the effects of sequestration on import volumes as cuts begin to take effect will be the subject of a future blog. As always, we welcome your comments.

By Sarah Arteaga, director of the Regional Economic Information Network for the Atlanta Fed’s Jacksonville Branch

May 19, 2011

Logistics in the Southeast, part 2: Supply chain challenges and opportunities

Back in February, I blogged here about a conference, "Freight in the Southeast—Moving Our Region's Business." It is increasingly obvious that the movement of goods both in the Sixth District and throughout the county is critical to commerce and the strength of the economy. Given the challenges we face domestically as a result of the Mississippi River flooding, and internationally as a result of the disaster in Japan, the timing seems right to circle back to the topic of logistics.

Earlier in the year, the Retail Industry Leaders Association (RILA) held its annual logistics conference, which it bills as "the largest single gathering of supply chain decision makers from retail and consumer product companies." Input and feedback from conference participants supplement information the Atlanta Fed receives from members of its trade and transportation advisory council, which is composed of industry leaders and experts from throughout the Sixth District.

Takeaways from the conference are too numerous to list, but a few stand out:

  • The nation's top retailers are rethinking their customer sales and delivery models. While Internet purchases are increasing as a share of total sales, retailers recognize that the way online sales are made is also in transition—from the desktop to mobile devices.
  • Growth in online sales is expected to be five times that of traditional, in-store sales and could amount to 15 percent of total sales by the end of the decade.
  • Sellers that rely on "old-school" approaches will miss out on a rapidly growing slice of the consumer pie.


The most successful retailers of tomorrow will be those who recognize the need for a multi-channel strategy (stores, catalogs, and the Web with purchases being made in person, over the phone, online via desktop, smart phone, tablet, etc.). This transition creates both challenges and opportunities. The number one challenge is the alteration of the supply chain: logistics providers become responsible for delivery of the goods ordered and may well be the only face-to-face contact the customer has with the "store." Outsourced providers of such services and the quality of their work can make or break the perception that the customer has of the shopping experience.

Shortly following the conference, I had a personal experience that made me circle back to some of what I had learned at the RILA conference. My wife and I ordered a new headboard (online) from a national merchandiser that features furniture and other housewares. The item was received damaged and because the delivery had been outsourced, requiring extensive communication with the seller's customer relations team. Ideally, this would have been resolved with the delivery folks acting as representatives for the retailer. In our situation, the ideal was not achieved—we still await replacement of the damaged item and, of course, the seller will be out the cost of the replacement and shipping. Perhaps this is an example of one of those supply chain opportunities—the creation of a seamless customer experience. Regardless of where the purchase is made (in store, via catalog, over the Internet, etc.) and how the purchase is delivered (picked up, delivered by store personnel, delivered by a third party, etc.), the future belongs to those retailers who recognize the criticality of the supply chain and incorporate the responsibility into their marketing department. The message was clear to me: the transaction doesn't conclude once the sale is made, but rather once the customer has taken final delivery of the purchase and is fully satisfied.

Opportunities exist for third-party logistics providers. As the conference emphasized, being able to contribute to an exemplary customer experience will place top service providers in a competitively advantageous position. As consumers change buying approaches and delivery expectations, successful partnerships between retailers and those transporting and delivering purchases will become critical.

By Chris Oakley, vice president at the Atlanta Fed and Jacksonville Branch regional executive

April 26, 2011

Beige Book: Southeast economy improved through March; but what about April?

On April 13, the Sixth District's most recent Beige Book was released. The opening paragraph, which summarizes the entire report, said, "Sixth District business contacts described economic activity as advancing modestly from mid-February through March. Retailers cited that consumer spending improved while auto dealers reported strong sales growth. Tourism activity remained positive as occupancy rates and air travel mostly increased. Residential brokers and builders indicated that sales growth of new and existing homes were mixed, but generally remained weak, while commercial contractors mentioned improving conditions as development increased slightly. District manufacturers experienced increasing levels of new orders and production. Transportation firms noted modest advances in shipments and tonnage. Banking contacts reported soft but improving loan demand. Labor markets continued to recover at a gradual pace. Cost pressures grew for most District firms, but the ability to pass through price increases continued to vary by industry."

The report discusses economic activity that took place from mid-February through March, but the official release date lagged by a couple of weeks. In a time when data and information are so easily available, this type of lag can make the information seem dated. The Atlanta Fed is continuously gathering information via meetings with our Regional Economic Information Network contacts. Recently, we held two advisory council meetings, which gave us more insight into their particular sectors. On April 12 our Trade and Transportation Advisory Council met in Atlanta, and on April 14 our Travel and Tourism Advisory Council met in Miami. What follows is some of the anecdotal information collected from these meetings.

Trade and transportation
Demand is up for almost all industries in the transportation sector, especially for those involved in export activity. The trucking industry is seeing a return to pricing power but is challenged with finding qualified drivers and mechanics and faces a shortage of drivers amid new regulations. Increases in the cost of fuel are challenging all modes of transportation, but fuel surcharges remain intact. Intermodal volume is benefiting from increased fuel costs as customers move certain types of goods from truck to rail. Inventories remain very low and inventory turns are high; slow steaming in maritime shipments is creating floating inventories. All industries reported increases in capital expenditures for replacement and new equipment, information technology, and infrastructure and buildings. Hiring is taking place at some level in most industries, and wage pressures are just beginning to surface in parts of the sector. Events in Japan have not caused major disruptions but lags in shipments of certain goods and equipment have been reported.

Travel and tourism
Activity is up in almost all industries of the sector. Occupancy, room rates, and cruise and convention bookings are increasing. A modest level of pricing power has returned; however, increasing fuel and commodity costs are challenging all segments of the sector. Restaurant activity is mixed, and price increases are being passed through. Capital expenditure is increasing in most of the sector, and the overall tone was one of optimism with a cautious eye toward rising commodity costs. The areas and locations adversely affected by last year's BP oil spill have regained business, and many are back to normal levels.

Based on these meetings, it appears that the Sixth District's economy is still moving in a positive direction.

By Shalini Patel, a senior economic analyst in the research department, Sarah Arteaga, a senior REIN analyst, and Lon Lazzeri, a REIN director

February 25, 2011

Logistics in the Southeast

(Note: This post is the first part of a two-part discussion of freight and logistics in the Southeast and beyond.)

The Jacksonville Branch of the Atlanta Fed regularly convenes an advisory council on trade and transportation. This council has existed since 2008 and is made up of industry leaders and experts from throughout the Sixth District. Members of this group have provided input to the Atlanta Fed, giving insight into this key component of the nation's economy, which has influenced forecasting and policy decisions. The "boots on the ground" intelligence we receive is also extremely useful in our contributions to the Beige Book on trade, transportation, and logistics issues.

I recently had the opportunity to participate in two conferences focused on challenges and opportunities in this business sector. The first, "Freight in the Southeast—Moving Our Region's Business," was coordinated by the Institute for Trade and Transportation Studies. I encourage you to visit the institute's website and get to know its executive director, Bruce Lambert. The institute's current membership includes the departments of transportation from states in the Sixth District (Florida, Georgia, Alabama, Tennessee, Mississippi, and Louisiana) as well as Arkansas, Kentucky, North Carolina, South Carolina, Virginia, and Puerto Rico. Its mission is to provide research data and expert opinions to its members concerning the effects of commercial freight movements on domestic and international activities as they relate to safety, infrastructure, and transportation.

The conference featured thought-provoking discussions on various topics affecting the industry and the economy more broadly. Examples include discussions on freight-planning activities at the state, regional, and national levels; managing today's and tomorrow's freight corridors, including the challenge of congestion; and trends in logistics and delivery. While participants agreed with one another on many points, there was healthy debate on a number of issues as well, including regulatory changes, particularly in the trucking industry; how to obtain funds needed for various infrastructure projects in both the short and long term; the intense competition among East Coast and Sixth District port authorities for limited federal and state dollars to fund port improvements; and dredging ports in anticipation of larger ships bringing goods to the Gulf and East Coast via the expanded Panama Canal.

Discussions on the state of the economy were also common; there was a consensus among participants that there is a pick-up in their industry and a level of confidence that has not been observed since the recession began. (In a recent post, SouthPoint focused on improving consumer confidence.) However, one presenter reminded us that "strengthening does not mean strong," alluding to improvement as compared with subpar performance in prior periods. Headwinds exist, but positive momentum appears to be building (and this momentum comes in a sector that touches just about every part of the U.S., if not the world, economy).

If there was any overarching theme, it was that collaboration is required to deal with both the challenges facing the sector as well as the opportunities presented. Participants seemed eager to work together to push the industry and the economy forward. I tip my hat to Bruce for coordinating this important conference and encourage readers to learn more. Next time, I'll share some insights from the Retail Industry Leaders Association 2011 Logistics Conference.


By Chris Oakley, vice president at the Atlanta Fed and Jacksonville Branch regional executive

April 11, 2013

Is Transportation Feeling Sequestration’s Effects?

The Atlanta Fed’s Trade and Transportation Advisory Council recently convened at the Jacksonville Branch to discuss current economic conditions in the transportation sector. The conversation focused on various topics related to the movement of goods as well as on how fiscal tightening will impact the nation’s ports and airports.

A poll of the council members revealed that demand was slightly higher in the first quarter of 2013 for the majority of firms than it was for the same period in 2012. Most council members indicated that they are implementing price or rate increases whenever possible: trucking companies are able to assess fuel surcharges along with some nonfuel price increases as wage pressures mount for qualified and available truck drivers. Railroads continue to enjoy increases in intermodal volume as higher fuel prices drive some cargo from truck to rail. In ocean shipping, fuel costs are a percentage of the direct cost per load and thus have a material effect on the bottom line.

First-quarter 2013 employment levels were higher for a third of the council members than year-earlier levels, and half of the council members expect somewhat higher workforce levels over the next three to six months. The proportion of part-time/temporary workers has remained virtually unchanged. The majority of the council members are planning to increase the pace of capital spending; funding for capital expenditures comes from a variety of sources. Ports in particular are seeking more money from public-private partnerships.

The outlook for short-term growth by council members is less positive than it was the last time the Atlanta Fed conducted the poll, in October 2012. At that time, half expected higher growth for the next three to six months. Currently, just over one-third anticipate higher growth in the near term. However, looking out two to three years, nearly 90 percent are forecasting higher growth.

During the meeting, the council members were queried about the effects of sequestration on their industries, particularly as it relates to the furloughing of U.S. Customs and Border Protection (CBP) personnel. Members indicated that the expectation of air cargo and maritime shipping industries at the outset of sequestration was that the budget cuts would affect the ability of ports and airports to clear goods in a timely manner, which would impact perishables and just-in-time shipments. Sequestration originally called for customs agents’ overtime to be cut at ports all over the country, and in March, approximately 60,000 CBP agents received furlough notices.

Recently, there have been reports of delays impacting perishable imports at airports in the Sixth Federal Reserve District. The Miami Herald reported that imports of perishables such as flowers, fruits, vegetables, and fish are being threatened by slow cargo inspections resulting from cuts in overtime pay for customs officers. And as the flower industry gears up for one of its busiest days of the year—Mother’s Day—the potential for delays is concerning. About 90 percent of all flowers the United States imports arrive at Miami International Airport, where customs officers who specialize in perishable goods inspect them. Delayed inspections can result in the stems going bad or arriving too late to be transported across the country in refrigerated trucks. The millions of stems that come through Miami for Mother’s Day could be affected.

According to an April 3 American Shipper article, the CBP announced it was postponing plans to furlough employees after an enactment of a six-month budget for the remainder of fiscal year 2013. This appropriation gives the U.S. Department of Homeland Security more flexibility in implementing budget reductions by taking money out of other programs so as not to impact front-line personnel. This measure would provide some breathing room at ports and airports. In addition, alternative measures have been put in place, such as cross-training of inspectors and relying on private sector entities to fill in the gaps.

In addition to perishable imports, interruptions in passenger processing at airports are a concern—though these types of delays were problematic before sequestration. There have also been some reports of delays in the screening of passenger cruise ships. 

Despite these scattered reports of problems, however, the consensus of the Atlanta Fed Trade and Transportation Advisory Council members was that it is still early, and the long-term effects from fiscal tightening on cargo and travelers cannot yet be fully determined.

A look at the effects of sequestration on import volumes as cuts begin to take effect will be the subject of a future blog. As always, we welcome your comments.

By Sarah Arteaga, director of the Regional Economic Information Network for the Atlanta Fed’s Jacksonville Branch

May 19, 2011

Logistics in the Southeast, part 2: Supply chain challenges and opportunities

Back in February, I blogged here about a conference, "Freight in the Southeast—Moving Our Region's Business." It is increasingly obvious that the movement of goods both in the Sixth District and throughout the county is critical to commerce and the strength of the economy. Given the challenges we face domestically as a result of the Mississippi River flooding, and internationally as a result of the disaster in Japan, the timing seems right to circle back to the topic of logistics.

Earlier in the year, the Retail Industry Leaders Association (RILA) held its annual logistics conference, which it bills as "the largest single gathering of supply chain decision makers from retail and consumer product companies." Input and feedback from conference participants supplement information the Atlanta Fed receives from members of its trade and transportation advisory council, which is composed of industry leaders and experts from throughout the Sixth District.

Takeaways from the conference are too numerous to list, but a few stand out:

  • The nation's top retailers are rethinking their customer sales and delivery models. While Internet purchases are increasing as a share of total sales, retailers recognize that the way online sales are made is also in transition—from the desktop to mobile devices.
  • Growth in online sales is expected to be five times that of traditional, in-store sales and could amount to 15 percent of total sales by the end of the decade.
  • Sellers that rely on "old-school" approaches will miss out on a rapidly growing slice of the consumer pie.


The most successful retailers of tomorrow will be those who recognize the need for a multi-channel strategy (stores, catalogs, and the Web with purchases being made in person, over the phone, online via desktop, smart phone, tablet, etc.). This transition creates both challenges and opportunities. The number one challenge is the alteration of the supply chain: logistics providers become responsible for delivery of the goods ordered and may well be the only face-to-face contact the customer has with the "store." Outsourced providers of such services and the quality of their work can make or break the perception that the customer has of the shopping experience.

Shortly following the conference, I had a personal experience that made me circle back to some of what I had learned at the RILA conference. My wife and I ordered a new headboard (online) from a national merchandiser that features furniture and other housewares. The item was received damaged and because the delivery had been outsourced, requiring extensive communication with the seller's customer relations team. Ideally, this would have been resolved with the delivery folks acting as representatives for the retailer. In our situation, the ideal was not achieved—we still await replacement of the damaged item and, of course, the seller will be out the cost of the replacement and shipping. Perhaps this is an example of one of those supply chain opportunities—the creation of a seamless customer experience. Regardless of where the purchase is made (in store, via catalog, over the Internet, etc.) and how the purchase is delivered (picked up, delivered by store personnel, delivered by a third party, etc.), the future belongs to those retailers who recognize the criticality of the supply chain and incorporate the responsibility into their marketing department. The message was clear to me: the transaction doesn't conclude once the sale is made, but rather once the customer has taken final delivery of the purchase and is fully satisfied.

Opportunities exist for third-party logistics providers. As the conference emphasized, being able to contribute to an exemplary customer experience will place top service providers in a competitively advantageous position. As consumers change buying approaches and delivery expectations, successful partnerships between retailers and those transporting and delivering purchases will become critical.

By Chris Oakley, vice president at the Atlanta Fed and Jacksonville Branch regional executive

April 26, 2011

Beige Book: Southeast economy improved through March; but what about April?

On April 13, the Sixth District's most recent Beige Book was released. The opening paragraph, which summarizes the entire report, said, "Sixth District business contacts described economic activity as advancing modestly from mid-February through March. Retailers cited that consumer spending improved while auto dealers reported strong sales growth. Tourism activity remained positive as occupancy rates and air travel mostly increased. Residential brokers and builders indicated that sales growth of new and existing homes were mixed, but generally remained weak, while commercial contractors mentioned improving conditions as development increased slightly. District manufacturers experienced increasing levels of new orders and production. Transportation firms noted modest advances in shipments and tonnage. Banking contacts reported soft but improving loan demand. Labor markets continued to recover at a gradual pace. Cost pressures grew for most District firms, but the ability to pass through price increases continued to vary by industry."

The report discusses economic activity that took place from mid-February through March, but the official release date lagged by a couple of weeks. In a time when data and information are so easily available, this type of lag can make the information seem dated. The Atlanta Fed is continuously gathering information via meetings with our Regional Economic Information Network contacts. Recently, we held two advisory council meetings, which gave us more insight into their particular sectors. On April 12 our Trade and Transportation Advisory Council met in Atlanta, and on April 14 our Travel and Tourism Advisory Council met in Miami. What follows is some of the anecdotal information collected from these meetings.

Trade and transportation
Demand is up for almost all industries in the transportation sector, especially for those involved in export activity. The trucking industry is seeing a return to pricing power but is challenged with finding qualified drivers and mechanics and faces a shortage of drivers amid new regulations. Increases in the cost of fuel are challenging all modes of transportation, but fuel surcharges remain intact. Intermodal volume is benefiting from increased fuel costs as customers move certain types of goods from truck to rail. Inventories remain very low and inventory turns are high; slow steaming in maritime shipments is creating floating inventories. All industries reported increases in capital expenditures for replacement and new equipment, information technology, and infrastructure and buildings. Hiring is taking place at some level in most industries, and wage pressures are just beginning to surface in parts of the sector. Events in Japan have not caused major disruptions but lags in shipments of certain goods and equipment have been reported.

Travel and tourism
Activity is up in almost all industries of the sector. Occupancy, room rates, and cruise and convention bookings are increasing. A modest level of pricing power has returned; however, increasing fuel and commodity costs are challenging all segments of the sector. Restaurant activity is mixed, and price increases are being passed through. Capital expenditure is increasing in most of the sector, and the overall tone was one of optimism with a cautious eye toward rising commodity costs. The areas and locations adversely affected by last year's BP oil spill have regained business, and many are back to normal levels.

Based on these meetings, it appears that the Sixth District's economy is still moving in a positive direction.

By Shalini Patel, a senior economic analyst in the research department, Sarah Arteaga, a senior REIN analyst, and Lon Lazzeri, a REIN director

February 25, 2011

Logistics in the Southeast

(Note: This post is the first part of a two-part discussion of freight and logistics in the Southeast and beyond.)

The Jacksonville Branch of the Atlanta Fed regularly convenes an advisory council on trade and transportation. This council has existed since 2008 and is made up of industry leaders and experts from throughout the Sixth District. Members of this group have provided input to the Atlanta Fed, giving insight into this key component of the nation's economy, which has influenced forecasting and policy decisions. The "boots on the ground" intelligence we receive is also extremely useful in our contributions to the Beige Book on trade, transportation, and logistics issues.

I recently had the opportunity to participate in two conferences focused on challenges and opportunities in this business sector. The first, "Freight in the Southeast—Moving Our Region's Business," was coordinated by the Institute for Trade and Transportation Studies. I encourage you to visit the institute's website and get to know its executive director, Bruce Lambert. The institute's current membership includes the departments of transportation from states in the Sixth District (Florida, Georgia, Alabama, Tennessee, Mississippi, and Louisiana) as well as Arkansas, Kentucky, North Carolina, South Carolina, Virginia, and Puerto Rico. Its mission is to provide research data and expert opinions to its members concerning the effects of commercial freight movements on domestic and international activities as they relate to safety, infrastructure, and transportation.

The conference featured thought-provoking discussions on various topics affecting the industry and the economy more broadly. Examples include discussions on freight-planning activities at the state, regional, and national levels; managing today's and tomorrow's freight corridors, including the challenge of congestion; and trends in logistics and delivery. While participants agreed with one another on many points, there was healthy debate on a number of issues as well, including regulatory changes, particularly in the trucking industry; how to obtain funds needed for various infrastructure projects in both the short and long term; the intense competition among East Coast and Sixth District port authorities for limited federal and state dollars to fund port improvements; and dredging ports in anticipation of larger ships bringing goods to the Gulf and East Coast via the expanded Panama Canal.

Discussions on the state of the economy were also common; there was a consensus among participants that there is a pick-up in their industry and a level of confidence that has not been observed since the recession began. (In a recent post, SouthPoint focused on improving consumer confidence.) However, one presenter reminded us that "strengthening does not mean strong," alluding to improvement as compared with subpar performance in prior periods. Headwinds exist, but positive momentum appears to be building (and this momentum comes in a sector that touches just about every part of the U.S., if not the world, economy).

If there was any overarching theme, it was that collaboration is required to deal with both the challenges facing the sector as well as the opportunities presented. Participants seemed eager to work together to push the industry and the economy forward. I tip my hat to Bruce for coordinating this important conference and encourage readers to learn more. Next time, I'll share some insights from the Retail Industry Leaders Association 2011 Logistics Conference.


By Chris Oakley, vice president at the Atlanta Fed and Jacksonville Branch regional executive