FACING THE YEAR OF THE SHEEP

According to Chinese astrology, on February 19, 2015, we will welcome the Year of the Sheep, sometimes referred to as the year of the Ram or Goat. As we enter this New Year, many supply chain managers will find themselves in a much better position than they were this time last year. The soon to end Year of the Horse, or 2014, if you prefer, was much kinder to us than anyone would have imagined at its beginning.

First of all, the economy has shown unexpected momentum, in fact the best since 2003. GDP is up and short term interest rates remain at a reasonable level. The price of fuel has been a pleasant surprise. Thanks to South Dakota production of shale oil, the price of crude oil is almost half of its July, 2014 price. This in turn has translated into a reduction in the cost of diesel fuel of 60 cents per gallon since July 15. This of course, bodes well for carriers and shippers alike, particularly since we are being faced with possible rate increases and uncertainty about dimensional weight pricing. The other side of that coin is if the price of oil gets too low, it will weaken the economy. While household purchasing power may increase, stock prices will drop and capital spending may decline. Already, we have seen a weakening in the stock market. One other small dark cloud on the horizon is the quiet move by some states to slip in an increase in state fuel taxes while prices are down.

As mentioned in an earlier blog, President Obama signed into law the Consolidated and Further Continuing Appropriations Act of 2015, designed to keep the Federal government open for business until September of this year. Included in this bill was an unrelated amendment that suspended truckers’ 2013 restart rule until an FMCSA study is completed. This should increase driver productivity and help alleviate the shortage of available drivers. The bad news is that Congress will deal with this again in September when the legislation expires. Hopefully, the mandated study will be completed and some reasonable rules developed.

Of interest to global firms in particular, is the current strength of the U.S. dollar. The index of the dollar’s value against other currencies is the highest in eight years. This translates into lower prices on foreign products, but can make American products more expensive in other countries. On balance however, a strong dollar is a good thing.

So, as we move ahead in a more positive environment, what is the Year of the Sheep apt to bring? According to Chinese astrologers, the sheep is a popular animal, known to be gentle and calm – “close to the meaning of good things”. More favorable times are projected, compared to last year. Many oriental horoscopes show a renewed faith in the stability of economic growth. Most indicate the next year will be a “period of prosperity and well-being”.

While some readers of this blog may place little credence in Chinese astrology, the positive developments of 2014 should give supply chain managers some encouragement. Certainly there are issues with which we must deal, but this year I believe we are in a much stronger position to take them on.

 

Written By: Clifford F. Lynch