Today’s March manufacturing report from the Census Bureau suggests that the manufacturing sector may have begun to rebound, promising increased freight volume ahead.

Factory shipments rose 0.4% from February after declining for six months. The gain was entirely due to motor vehicle manufacturers boosting shipments back to normal, a 6.1% gain, after a four-month slowdown to work off surplus inventory.
Packaged goods production has clearly stabilized, but there is no evidence yet of the anticipated modest spring pickup in shipments. Non-durable goods shipments and orders were off a nominal 0.1% following a small drop in February. Also, non-durable inventories were steady for the second month.
The durable goods market is still chaotic. Motor vehicles are back to normal, although reduced rebates caused a 16% drop in April retail sales. Most other machinery and component manufacturers were still working off excess inventory in March, although many have likely now hit their target inventory level and will begin to build inventory as sales rise. March shipments rose 0.8%, with the rebounding vehicle market masking continued steep declines for electronics and computers. Orders were up 3.5%. Here too, a strong vehicle market and one-time orders for military equipment masked a weakening technology market. But durable inventories fell 0.9%, including a huge 6.4% plunge in communications equipment, the sector known to have the biggest inventory problem.
The outlook for the spring is for a small gain in shipments together with steady or slightly lower inventories. Absorbing surplus inventories will keep freight volume from rebounding as quickly as manufacturing shipments. This is the payback for those loads hauled early last fall that ended up as unwanted inventory.