Ohio Transportation and Energy ; Federal Reserve Beige Book of Economic Conditions

The Federal Reserve published its recent Beige Book Report covering economic conditions of each banking district. During the past two days, the retail and manufacturing sectors of Cleveland Federal Reserve report were posted. Today, the following post covers economic conditions of Ohio freight transportation and energy industries.

Freight transport executives reported that shipping volume was stable during the past six weeks. Looking ahead to 2011, most carriers expect growth to be somewhat stronger than they experienced in 2010. They also expect that activity will be more in line with normal seasonal patterns. Almost all of our contacts reported rising prices for diesel fuel, some of which are being passed through to customers via a surcharge. Capital outlays remain at relatively low levels. Spending in 2011 is expected to rise modestly as freight carriers are forced to replace aging equipment. However, some carriers are considering leasing new equipment versus buying, as rising prices for new tractors constrain purchases. Hiring is for replacement only. Two of our contacts noted that they would like to begin hiring additional drivers, but it is difficult to find qualified applicants. Wage pressures are beginning to emerge due to a growing problem with driver turnover and a tightening of the driver pool.

Although energy production is more in-line with manufacturing process, energy is consists of modes of transportation and distribution, which utilizes the Ohio trucking sector. That is why the report on energy continues below.

Reports indicate that oil and gas output from conventional wells was fairly steady during the past six weeks. A small increase in gas production is expected if very cold weather persists. Production from Marcellus shale was somewhat higher and is expected to continue to increase. Spot prices for natural gas have increased slightly with the onset of winter, while wellhead prices paid to independent oil producers were fairly stable. Coal production has been steady since our last report, with little change anticipated in the near term. Spot and contract prices for coal were generally stable; however, the price of metallurgical coal increased slightly. Other than a rise in diesel fuel prices, equipment and material costs have been flat. Staffing has not changed, and it is expected to remain at current levels for the near term.

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