A Short(age) Tale

Trevor Needs Some Water

Once there was a man named Trevor living in a rural area who bought his drinking water for his water cooler from a local supplier. His requirements averaged four jugs (5/gal each) a month. In the summer he would use a little more, and in the winter a little less, but for the year it always averaged out to four jugs a month. So, every month Trevor would place an order for four jugs (20 gallons), to be delivered the following month.

But then an environmental event occurred at the spring where the water company is sourcing its supply. The company delivers two jugs to Trevor the next month, instead of four. The company explains the situation. It says he will get his other two jugs in about three weeks, because they have all their customers on allocation due to the shortage. They are unsure how much water they will deliver next month and don’t know how soon the situation will be rectified.

Now it is time for Trevor to place his next order. Let’s assume he can place monthly orders, twelve months out (so 12 monthly orders), and he can change the quantity he previously ordered, one month before delivery without any penalty.

How many jugs would you order under these circumstances? Let’s say Trevor orders eight jugs a month for the next 12 months. His logic being that if he is on a 50% allocation, he can still get his four jugs every month. When he is sure supply is normalized, he will cut the remaining orders in half. He also plans to put four additional jugs in safety-stock inventory, just in case supply is disrupted again.

How many do you order?

In addition, there is another water supplier. Unfortunately, this company draws water from the same spring and also has a shortage. However, Trevor thinks there is a chance this supplier could get more water sooner than his main supplier, so he orders 16 jugs spread out over the next four months from this company.

The typical monthly order is four jugs, but due to a supply shortage, Trevor has just ordered 112 jugs of water. And let’s say all his neighbors respond the same way. The water suppliers are ---- flooded with orders! They have never had so many orders in the history of the business. They don’t have to worry about filling all these orders in the short-term, because they don’t have enough product to do so.

What is Trevor’s new water demand? It hasn’t changed, it is still four jugs a month. But the shortage has tremendously impacted his buying (ordering) behavior. Now traditional economists would find fault with my story, claiming that if demand is 4 jugs, the rational action would be to order 4 jugs. However, I think behavioral economists would agree with my conclusions. Heck, if Trevor were thirsty when he was placing his order, he may have even ordered more.

Now under classic economics, the price of water would rise to alleviate the shortage. We are going to assume the water companies are going to use allocation in the short-term instead of price, so as to not alienate their long-term customers when the shortage ends.

The Reality of the Class 8 Truck Market

Now, you cannot argue that the story is not realistic, because it is based on what has happened in the Class 8 truck market this year. Orders for the last two months have been at all-time record levels. In fact, six of the top order months ever have occurred in the first eight months of 2018. Over 477,000 truck orders have been placed in the last 12 months, shattering the previous best 12-month period of 400,000 in 2005-2006. Those orders resulted in the peak production year of 376,000 trucks in 2006. The industry will be stretched to build that many in 2019 due to factory closings since 2006.

The primary reason for the high orders is a vibrant economy generating outstanding freight growth. Earlier this year, however, component suppliers could not keep up with this surge in truck demand. This shortage of components led to a severe shortage of Class 8 trucks. At one point, OEMs had around 1,000 semi-completed trucks parked, awaiting final components before they could ship. Some truck dealers waited over two months before receiving much needed inventory. OEMs could not raise prices to alleviate the shortage due to contracts and not wanting to damage long-term customer relationships.

The truck shortage has been abated for now, and suppliers are doing a much better job of meeting delivery dates. However, the supply chain is still very tight and could easily reemerge as an issue in the near future. Therefore, since demand remains robust, the response from fleets and dealers is to order trucks in record numbers, for delivery up to 12 months out, hoping to reserve more trucks if they are needed.

What is true demand? Unfortunately, its difficult to tell by looking at orders alone since some of the orders are to hold build slots, months out in the future. And backlogs are inflated, but by how much? Regardless, demand is extremely strong, and the fundamentals for freight and equipment demand are solid into mid-2019.

  

What Happens Next?

OEMs have to ramp up production to build all the orders they can, and suppliers have to keep pace. FTR (Freight Transportation Research) forecasts that freight growth will begin easing in the second half of 2019. If fleets have adequately increased capacity by that time, excess orders will begin to be cancelled and squeezed out of the backlog. If the economy stays at its current pace into mid-2019, the shortages could reappear, and the order deluge will continue.

This post first appeared on the FTR website with minor changes here..  FTR is the leader in analyzing and forecasting the commercial transportation industry.  For more information on FTR reports and services, please click here.)

Bottleneck In The Supply Chain Is An Economic Threat

The Institute for Supply Management’s PMI for Manufacturing (Purchasing Managers Index) jumped to 60.2 in June, up from 58.7 in May and rising for the second straight month.  Considering that anything over 50 represents growth, the 60.2 is a robust reading which means everything must be wonderful in the manufacturing sector, right? Well not so fast, Machine Boy. Literally, not so fast.

A closer look at the numbers shows some disturbing trends. A big jump in the Supplier Deliveries sub-index indicates deliveries from manufacturers to customers slowed tremendously in June.

The primary reason for late deliveries is a lack of manpower. Manufacturers assumed they would be able to expand capacity when they took the original orders, but because the economic recovery is widespread, all industries have been competing for the same labor pool.  That left many companies short on workers.

Even if you have enough workers, there still can be problems (as will be discussed later) if your suppliers are short on staff. If your supply chain consists of 50 vendors, but 10 of these suppliers are delivering late, it’s going to wreak havoc with your production schedule and result in late deliveries.

Another reason deliveries are slow is lack of trucking capacity.  Fleets managed capacity very conservatively after the Great Recession and that worked well in a slow growth economic recovery. But now that commerce has accelerated, there are not enough trucks and trailers to handle the amount of growing freight.  Many companies have been forced to bid for trucks in the spot market for the first time in years.  This is resulting in many late deliveries.

Class 8 Equipment Issues

The conditions causing delivery delays detailed above are severely prominent in the Class 8 equipment market.  Specific numbers are difficult to obtain, but industry sources tell me that more than 30 parts are in short supply at truck OEMs. Most of the shortages are the result of Tier 1, Tier 2 and even Tier 3 suppliers not being able to hire enough workers to make the needed components and parts. Companies are in some cases air-freighting parts in from Asia to keep production lines running.

Word on the street is there are over 10,000, and maybe as many as 15,000, semi-completed Class 8 trucks parked, waiting for parts to arrive, so they can be driven off the lots. Component deliveries have been so slow that some of these trucks have sat for over a month.

There is no good way to predict when the supply chain will open up and all needed parts and components will be delivered on time. And even when the key components arrive, all these trucks will need to be delivered to dealers and fleets throughout the country. This presents a logistics nightmare since OEMs were having problems finding drivers to deliver the trucks before the supply chain bottleneck struck. 

So ironically, the driver shortage is causing delivery problems in the trucking industry.  The driver shortage has grown progressively worse since the beginning of 2016 and is reaching a critical point. With the unemployment rate at 3.8% and the competition for workers from other industries, it gets more difficult for fleets to hire drivers every day.  A recent article in the Washington Post told the story of an 87-year old man who was offered a trucking driving job, provided he obtained his CDL. However, he turned down the $50,000 a year job because he did not want to spend that much time away from home.

Tariffs Enter the Picture

Most discussions of the new tariffs involve the impact on prices. However, my sources tell me they will soon negatively affect the supply chain in the short-term.  Aluminum coils from China and steel stock from other countries have been diverted or delayed because of the tariffs. Soon U.S. manufacturers will need these materials to make parts, components and products – some for the truck OEMs.  To a supply chain already performing poorly, the tariffs hitting at this moment just adds to the mess.

The Economic Impact

The lack of parts and components, for all industries, slows down production. The lack of trucking capacity slows down the movement of goods. At some point, this will slow down economic growth.  Normally, you would expect the economic laws of supply and demand to balance things out. And this will happen, in the long run. In the short run, it’s about to get ugly.

A Very Simple Freight Analysis

Trucking conditions are in wonderful shape. Fleets can’t keep up with demand and freight rates are high. Sales of trucks and trailers are expected to

approach record levels this year. The need for new truck drivers is huge and fleets and many owner-operators are making lots of money.

What’s going on?

* Total Manufacturing (from the Industrial Production data) is strong. Meaning:

The Freight Is Great!

* Food shipments are robust. People have more disposable income and are spending lots of it at restaurants. Result:

The Freight Is Great!

* Building materials are also healthy, but expected to moderate some in the second half of the year. There is a demand for new houses and office buildings. Causing:

The Freight Is Great!

* Chemical products started of the year slow, but are expected to recover in Q2 and beyond. Manufacturing should boost this sector. Leading to:

The Freight Is Great!

* Fabricated Metals are smoking hot. Manufacturing needs these components in high volumes. Making:

The Freight Is Great!

* Wood products are also up due to the construction sector. Subsequently:

The Freight Is Great!

* Durable Goods manufacturing is way up. Non-Durables are growing. Result:

The Freight Is Great!

* The Oil and Gas sector is exploding as crude oil prices rise. Causing:

The Freight Is Great!

* FTR’s Trucking Condition Index is at extremely high levels and is only expected to moderate slightly this year. Why?

The Freight Is Great!

* FTR’s Trucking Market Demand Index was at a record in April. Indicating:

The Freight Is Great!

* Unemployment just sank to 3.8%. People have jobs. People have money. People are buying lots of products that are moved by trucks. Result:

The Freight Is Great!

* Some economists have forecasted GDP growth of 4% for Q2. Which leads to:

The Freight Is Great!

* FTR’s Active Truck Utilization measurement is near 100% and expected to stay that way throughout 2018. This means nearly all active Class 8 trucks are being employed, because, of course –

The Freight Is Great!

* An industry veteran recently said he has never seen a market this strong in his 28 years of trucking. This is because:

The Freight Is Great!

* When traveling down the highway, you see many tractor-trailers hauling many types of goods. All because:

The Freight Is Great!

* There is a severe shortage of truck drivers to haul all the goods. Due to:

The Freight Is Great!

Demand for new Class 8 trucks and commercial trailers are at record levels. So much so, that component suppliers cannot keep up with orders. All because:

The Freight Is Great!

A German economist analyzing this situation might say:

Die Fracht ist großartig!

Which translated means: The Freight Is Great!

So, to summarize the current state of the trucking industry in four words:

The Freight Is Great!

This post first appeared on the FTR website with minor changes here..  FTR is the leader in analyzing and forecasting the commercial transportation industry.  For more information on FTR reports and services, please click here.)

Let The Good Times Roll – For at least two more years

GDP is high, and unemployment is low.  Manufacturing is booming, and wages are rising. So, everyone is joyous, correct?  Of course not, you are starting to see articles claiming that if things are this good, a recession must be coming soon.

So it is time to again consider what the truck equipment markets indicate about the timing of the next recession.  In March 2016, I warned that based on historical correlations, the decline in Class 8 truck builds foretold a recession beginning in Q4 2016.  This did not happen due to the following factors:

-         The Class 8 truck market ended up suffering a correction, but not a crash.  Typically when sales start to slide, they keep plunging.  Fortunately this time, they bottomed out in Q1 2017 and began a steady recovery which continues today.  It is important to note that the FTR (Freight Transportation Research) models in mid-2016 showed the market correcting but not crashing.  That’s why our forecasts were much more accurate than all those other one’s which predicted a market crash.

-         GDP for Q4 2016 and Q1 2017 were 1.8% and 1.2% respectively.  While not a recession, the “economic plane” did dip close to the ground before pulling out of the dive.

-         Although the economy had failed to cycle much since 2010, the Class 8 truck market continued to cycle through the period. The substantial difference being that truck demand didn’t cycle as much as in the past (a good thing), which is the difference between having GDP quarters of 1.8% and 1.2% growth versus a recession.

The U.S. economy has been expanding for over eight and a half years; the third longest period since World War II.  But this recovery has been characterized by its slow, plodding growth and muted cycles.

The Good News: The economy is finally experiencing significant growth again.

The Bad News: The economy is finally experiencing significant growth again.

If we cycle way up, eventually the economy overheats and cycles down causing a recession.  But it is even more difficult to predict the timing of the next recession under the current unusual environment. If the Trump administration’s economic initiatives work, then giddyap, we are going to ride this wave for a while.  If this upcycle is the result of the restoration of normal economic fluctuations or in the trade strategies fail, we are quickly coming to an economic peak.

And this may be a return to the “old normal”. I believe that the slow, abnormal economic growth of the past several years was the result of restrictive government policies and businesses being too cautious and fearful after the Great Recession.  President Trump has loosened those restrictions and business and consumer confidence is soaring for whatever reasons.  This may be just a huge economic reset that took eight years to accomplish after the crash.

What Do The Equipment Markets Indicate Now?

It is important to watch the truck and trailer markets because they are leading indicators of the general economy.  Class 8 truck sales is one of the key economic leading indicators tracked by the economists at General Motors.

The Good News: The equipment markets and the economy appear to back in sync.

The Bad News: The equipment markets and the economy appear to back in sync.

As previously mentioned, the equipment markets continued to cycle even though the economy did not change much.  However, now the economy is vibrant, and it is pushing equipment sales to record levels (if you factor out the Class 8 pre-buy factor in 2006).  This is good in that it shows the economy is healthy and getting back to performing “normally”.  It is bad in that the equipment market, driven higher and hotter, will probably experience a perilous drop before and during the next economic downcycle. This type of drop is inherent in truck and trailer equipment and cannot be avoided.

Because of the significant impact of a recession on truck and trailer demand, FTR cannot put a recession factor in the forecast.  For example, in we forecast a recession for 2020, it would drive our equipment forecast way down that year.  But if the recession occurs in 2021, then the forecast for both those years would be highly inaccurate.  So the assumption for the forecasts is for no recession, even as the possibility increases due to the length of this recovery and the surging economy.  If the “master” economists cannot predict the timing of the next recession – than neither can we.

When Is The Next Danger Zone?

Based on history, which doesn’t always repeat and forecasts, which can be inaccurate in the long-term, when do the equipment markets indicate a recession could begin?

If truck/trailer production peaks around June 2019 (the current forecast), and recessions occur 13-18 months after that (based on history), the “danger zone” would be July-December 2020, which is as good as anyone’s forecast right now.  The good news is unless there is an economic or geopolitical shock, we

don’t have to worry about a recession for the next two years.  The bad news is if the economy accelerates the next two years, the eventual downturn is going to hurt.

So, let the good times roll – for now. 

 This post first appeared on the FTR website.  FTR is the leader in analyzing and forecasting the commercial transportation industry.  For more information on FTR reports and services, please click here.)

How the Trucking Capacity Crisis was Born

The U.S. trucking industry is experiencing a capacity crisis, with insufficient numbers of trucks and trailers to haul an ever-increasing amount of freight. FTR’s (Freight Transportation Research) measurement of Total Truck Utilization is currently at 97% (meaning 97% of all trucks are in use). The index is expected to hit 100% later this year. While it is an impossibility for 100% of trucks to be hauling freight, it indicates extreme capacity

constraints in the industry, causing major disruptions for both fleets and shippers. Shippers are having problems to haul their loads and are paying much higher freight rates.

So how did we get into this mess? Well, you can blame the Great Recession. Throughout the oughts, fleets managed their capacity more loosely, maintaining a certain amount of “flex capacity” to handle peak freight periods and not caring much when this excess capacity was idle. This strategy worked well in that era, when freight continued to shoot upward fueled by the housing bubble. Staying ahead of a fast-paced game was profitable.

But then the bubble burst. Most large fleets had enough capitalization to survive. Middle-sized fleets that managed their assets well also lived, but over-aggressive ones and smaller fleets got slaughtered. There were approximately 5,500 fleet bankruptcies in 2008, another 2,200 in 2009, and still a considerable number in 2010. By 2012, an astounding 18% of trucking capacity had been removed from the system.

The long, slow economic recovery that began in 2010 did not pressure the industry to promptly replace the lost capacity. Fleets were able to put trucks back into service at a measured pace. The trucking industry, as well as many sectors of the economy, benefitted from the sluggish recovery because growth was easier to manage, and profits grew.

Fleets were also very cautious after seeing many competitors fold during and after the Great Recession. Businesses, overall, were more cautious, a key proponent of the long, slow recovery. Large fleets managed their capacity more conservatively. Medium-sized fleets strove to be lean, efficient operations. The result was a significant reduction in “flex capacity.” This was very logical under the circumstances, and extra capacity was rarely needed in the slow-growth environment.

Capacity utilization reached the normal range in mid-2013, signaling the industry and the economy were regaining strength. Utilization percentages were fairly stable for a few years, except for a blip due to the Hours-of-Service regulations in late-2014. However, the utilization rate began a definite upward climb in mid-2016 and accelerated through 2017.

During an FTR forecasting meeting in January 2017, our updated capacity utilization forecast graph appeared on the screen. There was stunned silence … and then someone said:

“If this is correct, we’re headed for a severe capacity crunch early next year.”

Our model predicted that accelerated freight growth would combine with productivity-limiting ELD implementation, to push the capacity utilization percentage to near 100% in 2018. Based on this, we began to warn our customers about the “possibility” of a capacity crunch. The expected rise in utilization was a main reason the 2018 FTR equipment forecasts were much higher than other forecasts for almost all of last year.

And then the surge in business confidence after the election started to turn into real dollars. The roll-back of regulations provided more economic impetus. Manufacturing activity revived, and the freight forecasts kept increasing. Now throw in some tax reform. The same forecast graph that caused the commotion 14 months ago appears even more ominous now.

The flatbed fleets saw the surge beginning last May and began to ramp up capacity. Spot market rates started to shoot up last March, flattened out in the second half of 2017, and then spiked at year’s end.

In September, we began hearing complaints from some large shippers that couldn’t find trucks to haul their freight. They had contracts but not trucks. This forced them into the spot market, resulting in higher freight costs and increased late deliveries. The frustrated logistics managers had to explain why the company was paying higher prices for reduced customer service.

But many fleets remained cautious in responding to the capacity crisis. Some people questioned our optimistic 2018 equipment forecasts as late as October, explaining the fleets were not showing any urgency in placing orders for 2018.

However, this was to be expected. It took over ten years for freight volumes to recover after the Great Recession, and fleets had learned to manage their capacity well over that time. It’s difficult to change what is working well. For the industry as a whole, it’s like filling a big barrel with a hose delivering a slow, steady stream. It takes a long time to fill the barrel, and you get bored waiting for it to top out. Just when you are near the top (which you can’t really see), the water pressure increases and now you have an overflow you are not ready for – and a mess.

Now orders for trucks and trailers are pouring in, OEMs are increasing rates, and we all hope that fleets can find drivers for the new trucks they hope to put into service. It’s a mad scramble: shippers trying to find trucks to efficiently move goods, and truckers trying to supply those trucks. And if it can’t be done, economic growth will suffer.

How A Sea Change Happens

A sea change happens one drop at a time …

Problems at the Mall

I make my annual Christmas shopping trip to the mall around December 10 every year. For at least the last ten years, I have purchased calendars at a kiosk in the mall. I usually buy at least four calendars: a 365-day desk calendar for me, another desk calendar for my youngest daughter, and a desk calendar and wall calendar for my oldest daughter.

The calendars for my youngest daughter and I vary in theme every year depending on what is available and what I bought last year. However, I always buy my oldest daughter both a Pittsburgh Steeler desk calendar and wall calendar every year. How I happened to spawn a rabid Steelers fan while living in Northeast Ohio is another story. I know I am very much a pattern shopper, but my routine is relevant to the rest of this story.

About five years ago I was surprised when the calendar kiosk moved to a much less prominent location in the mall. I reasoned that the mall had raised rental fees and the company had decided to change locations rather than pay the higher cost. The new location must have cut into sales too much, because the next year the calendar kiosk was back at its previous location, although it was slightly smaller. Then each subsequent year, it was scaled back some more. This made business sense as fewer people were going to the mall, due to on-line shopping and competition from superstores. As sales decreased at the kiosk, costs were lowered by reducing the rental space.

This reduction in calendar selection did cause some issues for me. It became more difficult to find calendar themes I wanted. This year, the kiosk was about half the size it was five years ago. They took the board/card game kiosk that always stood next to it and combined it with the calendars into one kiosk, about the size of the original calendar kiosk. I was immediately concerned about finding desirable desk calendars for my daughter and myself, but I fortunately found two good ones. However, the number of sports team calendars had been greatly reduced, and there were no Pittsburgh Steeler calendars.

The sales clerk said they had sold out of those because it was a popular calendar this year. Of course, based on my many years of experience buying calendars at this kiosk, I knew this was not true. They didn’t have the calendars this year because they had significantly cut inventory. I paid for my two calendars and drove home thinking about how I could get the Steelers calendars before Christmas.

Ten minutes after returning home I logged on to calendars.com. I quickly found my Steeler calendars and, surprisingly, they were both $5 cheaper than what I usually pay at the kiosk, and shipping was free. I also noticed the wide variety of desk calendars they offer; my guess is at least 10 times more calendars than the kiosk. The calendars arrived in eight days, and everyone had a Merry Christmas.

Now where do you think I’m going to buy all my calendars next year? Multiply this change in my buying behavior by millions of purchases, and it explains the already enormous growth in on-line sales and suggests it will continue. Now this wasn’t my first on-line purchase, that happened in 1999. I remember it because my co-worker Kurt congratulated me on having the courage to submit my credit card number on-line. Of course, there are still issues. I ordered something this summer from a Facebook ad and the bogus company failed to send the merchandise, and also hacked my credit card number. Overall, for many items, on-line purchasing is superior to in-store shopping.

The World Gets Smaller and the Supply Chain Shorter

My most interesting gift this Christmas was a pair of sneakers I customer-ordered from China. The shoes were ordered from another Facebook ad (I guess I’m a gambler). What makes the shoes special is that they feature the name and logo of my alma mater, The University of Akron. Instead of stocking inventory of assorted sizes of the hundred or so universities (assuming) available, they only need to stock the shoe “shell” and then print the graphics on fabric and glue it to the shell. So, through the magic of the Internet, I can custom order Chinese-made goods. I would be very interested to see the actual factory where my shoes were made.

I ordered the shoes just after Thanksgiving, and they arrived one week later

than promised (they got delayed in customs according to the package tracking they provided) but got here four days before Christmas. My wife loved the gift! (not easy to please), and I got a pair for myself. However, I don’t think the logos and images are licensed, so technically I am wearing illegal shoes to the Akron U basketball games. I have not been arrested yet.

The Sea Change For Transportation

Huge selections and free shipping. Ordering customer-made goods from Chinese factories. These are the drops that are fueling this sea change. And just when you thought this movement was containable, 3-D printing is only beginning. More ships are about to be capsized, with the changes to transportation and logistics again inevitable.

Christmas Lights Shine for a Bright Economy

An unusual economic indicator that I track is “Outdoor Christmas Lights” (OCLs). OCLs are a coincidental economic indicator, providing information about the current state of the economy. This indicator is only relevant when the economy is getting weaker or growing stronger, and its measurement is highly subjective – more observational than measurable. Also, it is only able to be observed for a few weeks each year. 

I believe OCL purchase/usage is a unique economic behavior because it combines a variety of factors:

-         It is a purely discretionary purchase at a time of the year when discretionary money is limited due to gift buying.

-         It involves an expense of time to purchase the lights/decorations.

-         It involves an additional time investment to install the lights. However, this investment may not be as extensive due the increased use of the new projection lights.

-         It also requires an additional cost of electricity to power the lights. Another discretionary expense.

-         People tend to display OCLs for self-enjoyment and can be a reflection of their overall mood. A large number of people display OCLs as part of their annual Christmas festivities, while a significant number may be influenced by how festive they are feeling in a given year.

-         The use also creates positive economic externalities in that other people get to enjoy the OCLs. The huge displays some people employ are done mainly for the external benefits they produce. There is also a group dynamic in play within neighborhoods where everyone receives benefits from everyone else’s displays.

Therefore, this is economic behavior that requires an initial purchase, a physical investment, an ongoing economic investment done for personal/family mood enhancement, with an external benefit to both neighbors and strangers. This is a unique situation which has broader economic indications.

My Observation

I have lived in the same neighborhood for over 20 years and have observed (not measured) OCL usage over this time period. I admit it is only one extended neighborhood (five allotments), but it is in Stark County, Ohio, a much-watched “bell-weather” county in presidential elections.

During 2003-2007, OCL usage steadily increased. In 2007, the economy was booming and OCL usage peaked. After the recession hit, OCL displays plummeted for a few years. Then, like the economy,  they increased gradually from 2012 to 2016. The displays in 2016 were much more prominent than 2012, but still not up to 2007 levels.

Which brings us to 2017. What I just observed was an unprecedented level of OCL usage.  All occupied houses on my street had displays, and this is on a scarcely-traveled cul-de-sac. There was a high percentage of participation in the other four neighborhoods as well.

What It Means

The economy may be even stronger than what some of the other indicators say. This also confirms the higher consumer confidence/sentiment numbers released recently. Look for final Christmas retail sales numbers to exceed the forecasts. People are feeling good about their situation and the economy. There is economic momentum continuing into 2018.