By Trucking News

Truck freight volume and spending in the second quarter of 2023 declined by the highest levels since the early days of the pandemic, the latest U.S. Bank Freight Payment Index revealed. Spending by shippers dropped 10.9% compared to the second quarter of 2022 while shipment volume dropped 9%, according to a statement from the Minneapolis-based bank.

“Trucking is in the midst of a significant slowdown,” said Bob Costello, senior vice president and chief economist at the American Trucking Associations.

“Weaker consumer demand for goods and a slowdown in manufacturing activity and housing starts are having a major impact on the industry – especially carrier operations.”

Nationwide shipment levels have now decreased for five consecutive quarters. In the second quarter, volume dropped most in the Northeast (27.1%) and Southeast (12.6%) year-over-year. The Southwest continued to be a bright spot, with shipments increasing 14.8%.

“In the spot market, we’ve been observing for a while sharp spending drops caused by lower volumes and increased capacity. This trend has now solidly penetrated the contract freight market,” said Bobby Holland, director of freight business analytics, U.S. Bank.

“Nearly every category we track – both nationwide and regionally – contracted in the second quarter.”

The Midwest region had the sharpest spending drop in the second quarter, 18.7% year-over-year. The Northeast and West also experienced double-digit spending declines, dropping 10.9% and 10.2%, respectively versus the second quarter of 2022.

The bank’s regional data found:

• West: Truck freight continued to struggle in the West region as port activity and housing starts there continued to slow. This is the lowest point for shipments in the West in three years.

• Southwest: Continuing to outperform other regions, the Southwest’s volume is benefiting from increased truck-transported trade with Mexico. The 14.8% year-over-year increase in shipments is the highest since 2018.

• Midwest: Continued slowdowns in manufacturing likely led to year-over-year shipments dropping by the largest level in the region since Q4 2021. Yearly spending also dropped by the largest amount since Q2 2020.

• Northeast: The 27.1% volume contraction is the largest in the history of the Freight Payment Index. The region faces multiple headwinds, including low housing starts. However, the contraction in household consumption likely had the biggest impact for this populated area.

• Southeast: Even though shipments contracted 12.6% year over year and slightly on a linked quarter basis, this was an improvement for the region. In the first quarter, shipments fell 16.1% year over year and 10.1% on a linked quarter basis.

Truck freight spending levels have now contracted year-over-year for two consecutive quarters. With spending at all-time high levels for the preceding six quarters, the recent drops brought spending activity back to its relatively strong levels of mid-2021.

Following yesterday’s dismal Manufacturing survey data (both in contraction – sub-50 – for multiple months), ‘soft landing’-hopers are banking on this morning’s Services survey data to save the narrative.

• ISM Services (Final) dropped to 52.3 (below exp) in July (from 54.4 in June) – its lowest since Feb.

• PMI Services dropped to 52.7 (below exp) in July (from 53.9 in June)

These disappointments are happening as US Macro data has been surprising to the upside…

Source: Bloomberg

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said:

“The service sector remains the main engine of growth in the US economy, though there are signs of the motor spluttering amid rising headwinds.”

“Business activity rose in July at the slowest rate since February, with the rate of expansion sliding further from May’s recent peak in response to sharply reduced growth of new business. Although spending from foreigners in the US continues to grow strongly as the post-pandemic travel surge shows signs of persisting, demand growth waned from domestic customers, often linked to the rising cost of living and higher interest rates. “

“Reflecting concerns that the upturn is faltering, companies have become much less optimistic about the outlook and reined-in their hiring as a result.”

Inflationary pressures remained historically elevated in July, as service providers in particular continued to register marked increases in input costs and output charges, often attributed to hikes in wages.

By the way, Diesel prices are both up… and down…

Services Employment slowed…

The S&P Global US Composite PMI Output Index posted 52.0 in July, down from 53.2 in June, to signal only a modest upturn in private sector business activity.

“With the weakening service sector expansion accompanied by a near-stalled manufacturing sector, the overall message from the surveys is that economic growth weakened at the start of the third quarter, cooling to an annualized rate of around 1.5%.

Williamson concluded even less optimistically that the survey’s price gauges, however, continue to signal a stubbornness of inflation around the 3% mark:

“An additional concern is that prices charged for services rose at an accelerated rate in July, often linked to higher staff costs. Such a wage-led stickiness of inflation in the vast service sector will naturally worry policymakers.“

So, in other words – STAGFLATION!

Authored by Eric Lundrum via American Greatness,

In new memos recently released by Facebook, the social media giant was pressured by the Biden White House into altering its algorithms so that mainstream news sources would be elevated over conservative sites.

As Just The News reports, the documents over to the House Judiciary Committee following a subpoena detail a series of meetings between Facebook executives and White House Digital Director Rob Flaherty in the spring of 2021. The demands from the White House focused on posts related to the Chinese coronavirus and the efficiency of the COVID vaccines.

In one meeting on April 14th, 2021, Flaherty asked Facebook if it was possible to artificially promote outlets such as the New York Times and the Washington Post, instead the Daily Wire and Fox News, particularly commentator Tomi Lahren.

“If you were to change the algorithm so that people were more likely to see NYT, WSJ, any authoritative news source over Daily Wire, Tomi Lahren, polarizing people,” Flaherty asked.

“You wouldn’t have a mechanism to check the material impact?”

“We have to explain to President, Ron [Klain], people, why there is misinfo on the internet, bigger problem than FB,” said Flaherty, according to the typed notes from Facebook executives.

“Where issues are, what interventions are, how well they are working, for products, want to engage in things that you know to be effective. I don’t even care about specific methodology, you have better, richer data than we’ll ever have.”

Tomi Lahren, who boasted a large following on Facebook, had recently announced that she would refuse to get the COVID vaccine. Meanwhile, Daily Wire had filed a lawsuit against the Biden Administration’s mandate for private workplaces to force its employees to take the vaccine. The Supreme Court eventually struck down Biden’s workplace mandate, while upholding his vaccine mandate for facilities that are funded by Medicare and Medicaid.

“What are the things driving hesitancy on your platform? What is it? How big is the problem? When you are intervening, how are you measuring success?” Flaherty repeatedly grilled the Facebook executives in one meeting.

“Never-before-released internal documents subpoenaed by the Judiciary Committee PROVE that Facebook and Instagram censored posts and changed their content moderation policies because of unconstitutional pressure from the Biden White House,” said Congressman Jim Jordan (R-Ohio), Chairman of the Judiciary Committee, on Twitter.

Constitutional scholars have also raised the alarm over the revelations, with George Washington University law professor Jonathan Turley saying that he has “asked Congress to pass a law barring federal employees from engaging in censorship and targeting of citizens.”

“Agencies have a right to speak in their own voices,” Turley added.

“Instead, the Biden Administration sought to engage in what I have called ‘censorship through surrogate.’ This is part of that pattern.”

Turley’s take is reiterated by University of Tennessee law professor Glenn Reynolds told Just the News on Wednesday that the First Amendment issue is when the “government is asking people to censor speech, their action is attributable to the government, so both they and the government can be sued.”x

“By working with the government, Facebook exposed themselves to liability,” Reynolds said, noting that they do not “share sovereign immunity” with the government and will “probably very much regret it.”

Bill Maher may be a little slow on the uptake when it comes to his willingness to call out disastrous Democrat policies and irrational leftist arguments, but at least he’s not afraid to go against the grain when the epiphanies strike. 

Conservatives and some moderates have been pointing out the Democrat insanity on illegal immigration for some time now, specifically the indignant rage leftists express over red states bussing migrants to major Democrat “sanctuary cities.” 

As Bill Maher notes, these city governments often pontificate on the virtues of the “American melting pot” until they are faced with housing and feeding thousands of migrants that pack the streets and the parks. Democrats support illegal immigration as long as they never have to deal with those migrants on their doorstep.  A humanitarian crisis is forming in New York, DC, Chicago, etc. and it is entirely caused by the political left’s unwillingness to admit that they were wrong. 

When one realizes that most illegals are only in this country with the intent to collect on as many entitlement handouts as possible, the delusion of the hard working migrant seeking out the American dream quickly fades and reality sets in.  

Keep in mind that the Democrats are still trying to form an “investigation” into Ron DeSantis and his move to bus a handful of migrants to the ritzy progressive vacation town of Martha’s Vineyard. 

While Dems focus intently on what they call “human trafficking” on the part of the Florida government, they seem to be oblivious to their own hypocrisy – They fed those same migrants a cheap lunch for the media cameras and then kicked them out of town within 24 hours to a nearby military base. 

The leftist ideal of the “melting pot” is a fraud. 

They don’t want to take care of the migrants either, they just want those sweet illegal votes in states where ID is not required. 

By Simon White, Bloomberg Markets Live reporter and analyst

Slumping bonds are a reminder that implicit or explicit yield curve control in the US is increasingly likely at some point, although there is scant evidence the Treasury is already engaging in such a policy by stealth.

Markets love a good “stealth” story. Whether it’s stealth QE, stealth QT or stealth FX intervention, there’s a (sometimes well-founded) yearning to challenge the mainstream narrative. One such theory of late has been that the Treasury has been engaging in stealth yield curve control (YCC).

There is little evidence to support that this is happening, as I’ll show. But with yields climbing and within 15 bps of 15-year highs, it pushes to the top of the agenda whether it will happen eventually. Given the worsening fiscal and market backdrop and elevated inflation, it’s looking more likely than not.

It’s been a tumultuous week for yields, with the Bank of Japan’s policy tweak, and the Treasury increasing its funding needs. But Fitch was the weatherman with its US downgrade, telling us about the downpour we can see for ourselves just by taking a glance at the fiscal data. In short, the US faces a perfect storm of a vertiginous fiscal deficit, a near-historically swollen debt load, ballooning interest-rate costs and collapsing tax revenues.

First, the deficit. It’s close to historical wides, bigger than it’s ever been outside of a recession, and almost as wide as it was in the depths of the GFC. It’s the largest in the world in GDP terms, and it is currently heading in the wrong direction. This heaps more pressure on the government debt-to-GDP level, already uncomfortably high at 112%.

Second, tax revenues. These have seen almost their largest annual fall ever, in an economy that’s supposed to be growing at 2.4%.

And then there’s rising interest-rate costs. The total interest expense as a percentage of tax revenue is expected to rise sharply in the next year or two, and make new highs by the end of the decade. However, these CBO forecasts should be taken with a grain of salt as they are based on a 10-year yield of only 3.8% (the ten-year average has been higher than that in every decade bar the 2010s and 2020s).

There is a view the Treasury is already implementing YCC, based on the fact it has been skewing its issuance towards bills and away from coupons. But issuing more bills is simply the easiest and fastest way for the Treasury to replenish its account at the Fed (the TGA). It was run down to almost zero in the lead-up to the debt-ceiling limit, and has now risen to over $500 billion.

This level of bill issuance is not unusual. The Treasury has an implicit target of about 20% for the amount of bills outstanding as a percentage of total debt. As we can see from the chart below, bills have often been more than 20% of debt outstanding over the last 30 years. Moreover, the Treasury announced this week it was raising its coupon-issuance amounts.

According to the stealth YCC thesis, less longer-dated Treasury issuance implicitly caps longer-term yields, but this has not historically been the case. As the chart above shows, the yield curve typically steepens – not flattens – when there is greater bill issuance – the opposite of what is desired by YCC.

We see the same relationship if we look the duration of US government debt outstanding. When the average duration falls – as it would if issuance is skewed toward bills – the yield curve tends to steepen. The current average duration held by the public is consistent with a steeper, not a flatter, yield curve.

This sounds counter-intuitive. If issuance drives yields, then more issuance at the front-end of the curve versus the longer end – equating to a fall in duration – implies the yield curve should flatten.

But the fact the relationship is the other way implies it’s likely that demand is the more dominant driver of yields in the medium term. There is ready-made demand for bills, from MMFs, etc, so when supply increases, demand rises to meet it, suppressing the yield-curve impact.

It’s thus hard to argue the Treasury is engaging in yield curve control. But that does not detract from the rising possibility it will need to be implemented in some shape or form eventually.

Banks and the Fed are reducing their Treasury holdings, while foreigners now collectively own about $5 trillion less USTs – about 10% – than they did in 2021. At the same time the “Treasury put” means large fiscal deficits are likely to become a feature, not a bug. That means inflation is likely to become embedded.

Fiscal profligacy and elevated price growth are a combustible mix and a road to prohibitively high yields via rising term premium. Yield capping thus starts to look like the endgame.

How it’s done is another matter, whether it’s the Fed co-opted to cap yields as it was in WWII, Treasury buybacks, or financial repression, whereby domestic institutions are forced to hold more government debt. Whatever way, at some point yield curve control in the US is becoming increasingly likely – by stealth or otherwise.

Update (0900ET): Well, we appear to have our answer to the most anticipated question for oil traders.

We noted earlier (below): “We see no looming change in the group’s current supply cadence, nor the required production adjustments set to take effect in 2024,” says Helima Croft at RBC Capital Markets, in a note.

“The question that market participants remain focused on is whether Saudi Arabia will sunset its unilateral 1 mb/d cut at summer’s end or roll it over for another month.”

The Saudi Press Agency is reporting:

An official source from the Ministry of Energy announced that the Kingdom of Saudi Arabia will extend the voluntary cut of one million barrels per day, which has gone into implementation in July, for another month to include the month of September that can be extended or extended and deepened.

In effect, the Kingdom’s production for the month of September 2023 will be approximately 9 million barrels per day.

The source also noted that this cut is in addition to the voluntary cut previously announced by the Kingdom in April 2023, which extends until the end of December 2024.

 The source confirmed that this additional voluntary cut comes to reinforce the precautionary efforts made by OPEC Plus countries with the aim of supporting the stability and balance of oil markets.

This has prompted gain in WTI, erasing much of yesterday’s DOE-driven dump…

*  *  *

As Bloomberg’s Grant Smith detailed earlier, the biggest question in oil markets is how long Saudi Arabia will extend its 1 million-barrel-a-day supply cut. Riyadh’s handling of a previous strategy offers some guidance — and reassurance — for crude bulls.

The kingdom launched the unilateral cutback last month in a bid to shore up global oil markets, undertaking the solo effort as its comrades in the OPEC+ coalition had already cut output as much as they could bear. It’s had some qualified success, boosting Brent prices to a three-month high above $85 a barrel in London.

The Saudis have committed to extending the measure into August, and OPEC-watchers expect that Riyadh will announce a further continuation into September this week. Traders are bracing for a statement from Saudi state media in the next couple of days, before an OPEC+ monitoring committee convenes to assess markets on Friday.

To understand what the world’s biggest crude exporter may do after that, it’s useful to consider how it handled a similar intervention two years ago.

In January 2021, the Saudis announced a unilateral 1 million-barrel cut to amplify the efforts of its OPEC+ brethren, to take effect in February and March. It was subsequently extended for one more month, and then unwound in stages over the following three months.

One lesson to draw is that the kingdom is prepared to go it alone with supply curbs for a considerable period; it’s quite possible that the restraints adopted in early 2021 could have lasted longer if others in OPEC+ hadn’t been so eager to increase production.

But at the same time, the limited three-month span of the move shows the Saudis won’t make such sacrifices indefinitely. Energy Minister Prince Abdulaziz bin Salman has described this summer’s curbs as a “lollipop” for markets — and at some point all treats must be taken away.

Perhaps the most important final lesson is that, when it comes to restoring shuttered supplies, Riyadh prefers a cautious and gradual approach rather than any sudden moves.

As a result, we may see the latest 1 million-barrel reduction eventually unwound in piece-meal stages. And that ought to give confidence to oil bulls betting that the current rally can go further.

Chilean-American blogger Gonzalo Lira, who was initially detained by Ukrainian intelligence in May for ‘pro-Russian sympathies’—has reportedly been rearrested as he was trying to make his way out of Ukraine into Hungary. His crime?: publishing YouTube videos critical of the war & the US-Kiev-NATO stance.

He once again could face lengthy imprisonment, or even torture – given previous allegations which surfaced during his first detention – but he’s been shunned by the Biden administration and ignored by mainstream media. So much for “democracy”, free speech, and rule of law… as Lira simply doesn’t have the ‘correct’ viewpoint on the war, and thus Washington doesn’t bat an eye over his fate. Watch an entirely legitimate question on Lira from a brave reporter get ignored in the State Dept briefing room (Aug.1st)…

The Grayzone’s @cosgrove_iv asked @StateDeptSpox today about the status of Gonzalo Lira, the US citizen who was jailed by the Ukrainian govt for challenging its official narrative of the war and whose Twitter account now claims he’s making a break for the Hungarian border pic.twitter.com/kc7NY6hkdt

— The Grayzone (@TheGrayzoneNews) August 1, 2023

On Tuesday, Lira posted multiple videos explaining that he was attempting to escape Ukraine to neighboring Hungary. 

He was due in a Ukrainian court this week, but essentially skipped bail and tried to make it across the Western border, where he was hoping to be granted asylum. His initial apprehension on May 1st by the the Security Service of Ukraine (SBU) was for “producing and disseminating materials that justified the armed aggression” of Russia. This included a piece of analysis posted to YouTube called simply ‘Ukraine: A Primer”.

While Lira had not been heard from in months through his typically active social media accounts, he suddenly this week began posting again and documented his ordeal, summarized in a First Post report as follows: 

According to Lira, he was beaten and tortured because the Security Service of Ukraine (SBU) wanted to extort his entire savings, which amounted to approximately $100,000 when considering the value of the confiscated computers and phones.

…Following his arrest, a judge ruled that he should remain in custody until the trial. Notably, in April 2022, Lira had been detained by the SBU before but was released after a week without any charges filed, likely due to public pressure.

Scenes from his first arrest and a court hearing in May, which his family and supporters called a “kangaroo court”…

Still facing potential prosecution, it seems he took his chances and fled…

Troubling posts

— Elon Musk (@elonmusk) August 1, 2023

And there is now what appears to be an official statement from Ukraine’s military, issued Wednesday, stating that he is indeed under arrest again (below).

Additionally, Mark Sleboda, an American political commentator and Navy veteran living in Russia, reported the following on Wednesday: “I can affirm that Gonzalo Lira, wanted by the Kiev Putsch regime for the crime of criticizing it (aka as ‘free speech’), tried to escape the West-backed Kiev Putsch regime across the Ukrainian border into Hungary where he intended to request political asylum.”

UKRAINE SENDS OUT AMERICAN TRANNY TO REVEAL THE SBU HAS ARRESTED GONZALO LIRA FROM ATTEMPTING TO SEEK ASYLUM IN HUNGARY pic.twitter.com/1pgwjxW7je

— The_Real_Fly (@The_Real_Fly) August 2, 2023

“I can further affirm that Lira was stopped on the Ukrainian side of the border from crossing and has since disappeared, now for more than 24 hours,” Sleboda added. “That is the last that anyone has heard from him.”

Will an American in Ukraine be convicted for posting YouTube videos? And more importantly, will Washington raise any objection whatsoever over the fate of its citizen? 

By Grant Smith, Bloomberg Markets Live oil reporter

The biggest question in oil markets is how long Saudi Arabia will extend its 1 million-barrel-a-day supply cut. Riyadh’s handling of a previous strategy offers some guidance — and reassurance — for crude bulls.

The kingdom launched the unilateral cutback last month in a bid to shore up global oil markets, undertaking the solo effort as its comrades in the OPEC+ coalition had already cut output as much as they could bear. It’s had some qualified success, boosting Brent prices to a three-month high above $85 a barrel in London.

The Saudis have committed to extending the measure into August, and OPEC-watchers expect that Riyadh will announce a further continuation into September this week. Traders are bracing for a statement from Saudi state media in the next couple of days, before an OPEC+ monitoring committee convenes to assess markets on Friday.

To understand what the world’s biggest crude exporter may do after that, it’s useful to consider how it handled a similar intervention two years ago.

In January 2021, the Saudis announced a unilateral 1 million-barrel cut to amplify the efforts of its OPEC+ brethren, to take effect in February and March. It was subsequently extended for one more month, and then unwound in stages over the following three months.

One lesson to draw is that the kingdom is prepared to go it alone with supply curbs for a considerable period; it’s quite possible that the restraints adopted in early 2021 could have lasted longer if others in OPEC+ hadn’t been so eager to increase production.

But at the same time, the limited three-month span of the move shows the Saudis won’t make such sacrifices indefinitely. Energy Minister Prince Abdulaziz bin Salman has described this summer’s curbs as a “lollipop” for markets — and at some point all treats must be taken away.

Perhaps the most important final lesson is that, when it comes to restoring shuttered supplies, Riyadh prefers a cautious and gradual approach rather than any sudden moves.

As a result, we may see the latest 1 million-barrel reduction eventually unwound in piece-meal stages. And that ought to give confidence to oil bulls betting that the current rally can go further.

Tucker Carlson dropped a shocking interview on Wednesday with Devon Archer, two days after the former Hunter Biden associate testified before Congress, where he admitted that he and Hunter Biden essentially traded on the Biden name, but also claimed that ‘the big guy’ wasn’t involved.

Tucker begins by asking Archer if he thinks Hunter could have succeeded as well in his business endeavors if he was not the son of the vice president. Archer trod a little carefully at first, reflecting on Hunter’s law school background but then admitted:

“The brand of Biden adds a lot of power when your dad’s the Vice President.”

Archer also confirmed “yes, I can definitely say that” then vice-president Biden knew there were officials in the room when he got on the speakerphone with Hunter Biden – the 20 or so times that Archer recalls.

“So Joe Biden, who is very much a product of Washington, of course must have known that he was calling into effectively a business meeting,” Carlson said. “Something’s happening. He must have understood that that was kind of what his son was selling.”

“Well that’s hard for me to speculate,” Archer answered. ” “But like, just to keep it to the facts, Joe Biden, then the sitting Vice President knew that there were Hunter’s business associates in the room,” Carlson pressed.

“Yeah, I think I can definitively say at particular dinners and meetings, he knew there were business associates and he, or if I was there, I was a business associate too. So I think, you know, any of the other colleagues from the DC office or New York were there,” Archer said.

He also said that Hunter’s ability to reach out during business meetings to the then-VP was the “pinnacle of power in DC”.

Understanding a regulatory environment means selling access… most people interpret it that way.

…

…the power to have that access in that conversation, and it’s not in a scheduled conference call and it’s a part of your family, that’s like the Pinnacle of power in DC. -Devon Archer

“…if you’re sitting with a business associate and hear the vice president’s voice, that’s prize enough…that’s pretty impactful stuff,” Archer continued, adding that it was “an abuse of soft power.”

Archer also admitted that he “flew too close to the sun” and “got burned” by the Biden family – and that it’s “disingenuous” to act unsure as to why Ukrainian energy giant Burisma hired Hunter, who served on its board from 2014 – 2019.

Watch:

Ep. 12 Part 1. Devon Archer pic.twitter.com/ElEzAZtBcA

— Tucker Carlson (@TuckerCarlson) August 2, 2023

Developing, check back for updates…

The UK government is moving their environmental policies a little bit closer to common sense. 

Industrial companies now face less strict financial burdens for polluting after the government “watered down” reforms compared with those set by the EU, the Financial Times reported last week. 

The new reforms offer more allowances than expected to polluting industries, the report says. 

As a result of the changes in UK’s carbon trading scheme, carbon prices are trading at a steep discount compared with Europe. This has led to warnings that the reforms will “undermine” green investments and increase fossil fuel use. 

James Huckstepp, an analyst at BNP Paribas, told FT: “The changes to the carbon market have largely passed under the radar in the UK but will have the biggest impact of any policy on the UK’s emissions path.”

The UK Emissions Trading Scheme put a price on the emission of one ton of CO2, similar to a plan in place by the EU. Some companies, like electricity generators, get allowances to cover some of their necessary emissions. 

As time progresses, the allowances are cut, thereby incentivizing companies to pollute less – or be forced to pay up. But this year the UK government said it was handing out an additional 53.5 tons of extra allowances between 2024 and 2027. 

Since the announcement, UK carbon prices have been trading at a steep discount to European prices. UK carbon prices are £47 a ton, compared to €88.50 (£75.86) in the EU. Previously, the two prices had been near parity. 

Adam Berman, Energy UK deputy director of advocacy, commented: “A robust carbon price is critical to attracting investment in clean energy that can bring down prices, reduce emissions and bolster our energy security.”

“Swapping lower prices in the long run for a short period of low prices today is the definition of a penny-wise, pound-foolish approach,” he added, stating that the carbon market was the “cornerstone of the UK’s decarbonization strategy”.

“While there are short-term benefits to energy-intensive industries, the discount that has emerged versus the EU will make it much more challenging for the UK to meet its climate goals, from disincentivizing wind farms to encouraging power generators to burn more gas,” Huckstepp at BNP concluded.