Full Steam Ahead for U.S. Commerce Means Vital Economic Support

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America’s network for moving goods into and around the country is the busiest in years after being throttled by the pandemic, providing vital support for an economic rebound that’s moderating in other areas.

Ports are seeing a flood of container imports while railroads and trucks rush those goods -- as well as domestically produced merchandise and materials -- to distribution points. The surge in activity has its roots in the shutdown of the economy that left businesses reliant on inventories, which are now extremely lean as demand accelerates.

The restocking has led to record container imports into the Port of Los Angeles and boosted intermodal carload numbers for the nation’s railroads. It all adds up to vital support for the economic rebound amid a stalemate over government relief and the lack of a coronavirus vaccine.

Steady factory production and a busy transportation network will help fuel hiring, hours worked and incomes. That, in turn, can further bolster consumption, which has slowed from rapid gains from the depths of the pandemic.

“A positive feedback loop is under way,” Neil Dutta, head of U.S. economic research at Renaissance Macro Research, said in a email. “It can be especially strong this time around since the inventory shortfall is quite large.”

At the Port of Los Angeles, the biggest U.S. container port, imports of 20-foot equivalent units climbed to an all-time high of 516,286 in August. With economies around the world stirring to life and looking to restock, shipping costs have accelerated and, by one measure, are the highest in eight years.

Since May, “there has been a significant replenishment of warehouse inventories,” Gene Seroka, the port’s executive director, said in a statement. “Coupled with retailers planning for consumer holiday spending, it has created a surge of imports.”

Railroad car loadings have increased in concert with the pickup in seaborne trade. It’s also been powered by retailer preparations for the holiday-shopping season and a shift in consumer shopping preferences to the internet from the storefront.

Union Pacific Corp. Chief Executive Officer Lance Fritz told a conference Sept. 9 that “demand is at or near peak season levels,” driven by e-commerce and inventory restocking.

Railroads have benefited from a tight trucking market. A gauge of U.S. trucking conditions, which includes measures of freight volumes, rates and capacity, rebounded sharply in June. While the index cooled in July, “the near-term outlook remains favorable for carriers,” Avery Vise, vice president of trucking for Freight Transportation Research Associates, said on the company’s website.

FedEx Corp. expects “a peak holiday shipping season like no other in our company’s history,” Chief Operating Officer Rajesh Subramaniam said on the company’s earnings call last week. He also said FedEx will add 70,000 jobs across the U.S.

The jump in e-commerce prompted the package-delivery company to pull forward by three years to 2023 its forecast for when U.S. shipments will total 100 million a day. FedEx said on the call that services spending has shifted to goods, and pent-up demand has given that a boost.

Investors have taken notice. The rush to replenish from both international and domestic producers powered the Dow Jones Transportation Average to a record high last week, though it’s since pulled back with the rest of the stock market.

©2020 Bloomberg L.P.