The word inflation can cause a lot of stir, questions, concerns, and even hope for what it might mean to the economy. In fact, the word inflation can mean major impacts to industries that are reliant on the use of freight and other “delivery of goods” systems. The latest inflation rate for the United States stands at 0.9%, which was published by the U.S. Government in mid April 2016 with the next inflation rate to be released around May 16th, 2016. But what do inflation rates mean when it comes to the overall impact on freight, freight brokers such as freightrun.com?
At first glance, the basis of inflation would suggest that because the price of goods and services rise and as result the purchasing power of currency falls, that the cost to import/deliver goods would too rise, causing a slow down in the use of freight imports into and throughout the United States. Since inflation rates in the 1970’s drastically influenced the price of oil, and therefore gasoline prices, causing an increased spike in the cost at the pump, many assume that inflation will drive up oil prices and gasoline costs to run many of the shipping services that deliver nationwide freight. Naturally the word inflation and freight/shipping are often correlated to spikes in cost and reduction in freight output.
Surprisingly this couldn’t be further from the truth. In reality, the steady growth seen in 2002 of freight shipments was possible because of the growth in the US economy at that time due to rising inflation rates and from 1993-2003 there was a reported $11 trillion dollar increase (45 percent) of measurable value of shipments. The most recent published data states that in 2014, the freightindustryemployed 4.6 million people, which made up 9.5% of the nations economic activity and assets grew from $29.6 trillion to $50.9 trillion U.S. dollars in 2013. Largely due to increasing international merchandise trading, improvements in freight productivity and the vast delivery network for transportation in the United States, the impact of inflation in the world of freight is a positive one.
What else impacts freight stability in the face of inflation?
It’s not just the demand alone for merchandise that is impacted by inflation; it’s also the idea of “buy now before the prices jump!” With inflation impacting not only purchasing prices, it also generates a mad rush to buy items at a lower price now to avoid the spike caused by inflation. So, consumers buy more, thus driving more freight delivery and ultimately producing a steady flow of delivery of goods in both U.S. and international markets. But as you expect, when inflation prices catch up, the value of the dollar goes down. So what happens to purchasing of goods? Well, it continues to grow…what? How?
Just as much as the economy adjusts, so too do the people who rely on sales of merchandise and goods. As increase demands of consumer goods and the desire for rapid delivery of goods, and the rise of international trade expands the long-term freight growth when the short-term spike of inflation wears out its welcome. In today’s market, the high demand is not just for any goods- it is for specific low weight high value products. Can you guess what those are? If you guessed laptops, tablets, cell phones and other handheld electronic devices then you are correct! The value of these items are astronomically higher than others and cost less to ship, bulk orders and lower cost shipments and retail prices will also follow.
So, due impart to improved delivery systems of freight, reliable shipments and on time tracked delivery, consumers are eager to get their hands on a variety of low weight and high valued goods driving up the steady stream of freight shipments inside and outside the US. In addition, the immediate “buy now” mentality driven by the initial inflation scare leads to a flux of freight deliveries. No matter what the economy does, people adjust and shipments press on. So what is the impact of inflation on freight? It’s a big one- in a good way!