Warehouse on Wheels releases Q4 2024 Quarterly Economic Report
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Real GDP: Q4 GDP was trending at 3.1% early in January, well ahead of analyst expectations for 2.1% growth and ahead of last year’s 2.5% growth rate. For 2025, the incoming Trump Administration believes that it can hit 3% growth while still taming government spending (essentially trading government spending for incentives to private business to spur private spending and investment). Given that 2024 likely will come in between 2.6% and 2.7% growth, 3% is attainable. The other concern is inflation, and whether 3% growth can keep disinflation trends continuing.
Inventories-to-Sales: The latest data from Q4 suggests that the global overstock situation is roughly ending. Only 14% of logistics managers believe that they are sitting heavy (as of December). Some early inbound of merchandise in December and January (inventories for the second quarter of 2025) could slow some orders late in January and early in February (and boost demand for temporary trailer rentals in the process). But generally, inventories are balanced headed deeper into Q1.
Warehousing: National vacancy rates are at 7.3% (a change of 2 points higher year-over-year and above the 7.1% rate last quarter) and industrial supply was still slightly outpacing demand. Savills reported that there was 16.6 BSF available at the end of Q3 unchanged from 16.5 BSF in Q2 but up from 15.9 BSF in Q3 of 2023. Net absorption was 45.8 MSF (vs. 58.7 MSF a year ago) while there was still 357.2 MSF under construction (vs. 625.5 MSF a year ago). Savills still estimates that it could take two and a half more years to absorb current inventory to return to 2019 vacancy levels at current absorption rates. Rent prices are still 72% higher than in 2019 (a 14.4% annual rate of growth).
Supply Chain: 2025 is looking up, according to most forecasts, for supply chain activity. The National Retail Federation is still predicting that the first half of 2025 will see nearly 10% growth in intermodal activity and the movement of containers. Armada forecasts for truck tonnage, air cargo, rail (both carload and intermodal) and maritime are all bullish for the year showing growth of between 4-6% across the modes. Again, as mentioned, the industry is coming out of a 2 year cycle in which the sector was largely under recession pressure despite broader economic growth. Inventory overstocks were still the culprit, keeping the upstream portion of the supply chain weaker. With that now in-cycle, full upstream demand and movement/storage of inventories of raw materials, component parts, etc. will pick up pace for the first time since the fall of 2022.
Retail: Retail sales in the holiday period from Thanksgiving through the New Year showed growth of nearly 3.8%, up slightly from expectations for growth of about 3.5%. In Q4, consumer spending surprised analysts and accounted for nearly 81% of GDP contribution. That is much higher than the typical rate of about 70%. In addition, with wages still growing at nearly 4% and inflation trending at 2.7%, households are being given an opportunity to dig out of their malaise. The lower half of household incomes that have been hardest by inflation will see more disposable income in 2025, and if this does indeed happen, it would activate nearly 78 million households and get them spending on discretionary items.
Manufacturing: Global PMI data shows the US manufacturing sector in slight contraction with a reading of 49.4. Many Asian markets were still weak while India was still the fastest growing market in the world. Most manufacturers are optimistic about 2025 and are expected to start increasing capacity, hiring, and perhaps building raw material inventories to prepare.
Geopolitics Clear Focus: With the incoming Trump Administration, a focus on change in the geopolitical landscape is on tap. Everything from tariff risk to ending the Red Sea Situation will create change – most of it positive. Whereas conditions will be volatile in the early stages of the new administration, opportunities will arise in 2025 for growth as regulatory pressures ease, investment flows into the country, etc.
