Credit Card Delinquencies Surged in 2023

Credit card delinquencies surged over 50% in 2023, reaching $1.13 trillion in total debt, with a 59% jump in serious delinquency (90 days or more past due) from the end of 2022. At an annualized pace of 8.5%, this increase led to a total consumer debt of $17.5 trillion, as the New York Federal Reserve reported. Delinquencies also rose in mortgages, auto loans, and other categories, contributing to a 1.42% overall rate of debt 90 days or more past due, up from just over 1% in 2022. Despite rising delinquency levels, total debt aligns with pre-Covid-19 pandemic growth rates. Household debt increased by $212 billion in the quarter, a 1.2% quarterly rise and 3.6% annually. The surge in credit card debt and auto loans coincided with a Federal Reserve tightening cycle, raising short-term borrowing rates by 5.25 percentage points. As a result, credit card interest rates spiked from 14.5% to 21.5%. Though delinquencies are rising amid economic growth, concerns arise about potential credit crunches if the economy slows. Mortgage debt rose by 2.8%, and the delinquency rate increased to 0.82% in 2023. (Source: Jeff Cox)

First Bank to Make a 2024 Recession Call Now Backs Down

Deutsche Bank has revised its economic outlook, abandoning its earlier prediction of a mild recession in the first half of the year. The bank now anticipates solid 1.9% growth in 2024, with the first Fed rate cut expected in June, totaling 100 basis points. Positive factors include strong 2023 economic performance, a resilient job market, and easing financial conditions. Consumer spending remains robust, surprising economists, with the pace of credit condition tightening noticeably easing. Potential risks to the outlook include greater pass-through from prior Fed tightening and increased geopolitical risks. Deutsche Bank's year-end S&P 500 forecast is 5,100, among the highest on Wall Street. (Source: Barbara Kollmeyer)

UPS Announces Cuts and Sale of Coyote

Due to its struggling performance, UPS Inc. has announced plans to explore strategic alternatives, including a possible sale of its truckload brokerage business, Coyote Logistics. The move comes as part of UPS' initiative, "Fit to Serve," which also involves cutting 12,000 full- and part-time management and contract jobs in 2024. CEO Carol Tomé admitted that UPS didn't fully grasp the cyclical nature of Coyote's business when it was acquired in 2015 for $1.8 billion. Coyote's revenue, which nearly doubled during the pandemic, has declined significantly.

Like other freight brokers, the truckload brokerage business has faced challenges amid slowed demand and collapsed rates. With the job cuts, UPS aims to save approximately $1 billion in 2024, impacting less than 3% of its workforce. The layoffs will not affect unionized employees, and UPS emphasized that the jobs will not be reinstated even as volumes recover.
The company anticipates a challenging first half of 2024, with difficult comparisons, a weak macro environment, and higher labor costs from the previous year's Teamsters union contract. Despite expecting revenue and margins to stabilize throughout the year, UPS does not project significant year-over-year gains and forecasts a decline in operating margins. The company expects 2024 revenue between $92 billion and $94.5 billion, with adjusted operating margins ranging from 10% to 10.6%. (Source: Mark Solomon)

Dunavant Solution:

The weak macro freight environment is an opportunity to think anew in managing freight expenditures. Dunavant's Domestic Team stands ready to assist. Contact us.

Monday's Mexican Trucker Strike

Truckers in Mexico initiated a nationwide strike on Monday to protest the escalating issues of cargo theft and violence against freight transporters. Thousands of drivers from up to 15 trucking industry organizations, including the United Federal Drivers Association and the Mexican Transport Alliance, participated. The strike addressed concerns such as increased patrols from the National Guard on high-theft roads, stricter penalties for cargo thieves, and better support for affected truckers' families. This action follows a previous postponement in August after promises of enhanced security measures from federal authorities. Despite these assurances, cargo theft incidents rose by 4% in 2023, with 9,181 cases reported, including 7,862 involving violence. The National Chamber of Cargo Transportation revealed that at least 50 truck drivers have been killed by cargo thieves since 2023. The trucking industry has called for a meeting with President Andres Manuel Lopez Obrador to find solutions. Concurrently, other trucking protests have occurred, including demonstrations on the vital Mexico-Queretaro highway. (Source: Noi Mahoney)

Dunavant Solution: Our CBMX Team has the experience and know-how to help you navigate these ongoing challenges with freight security in Mexico. Contact us.

Freedom of Navigation Under Threat

The longstanding principle of freedom of navigation, allowing ships from any nation to sail the high seas, faces unprecedented challenges. Incidents like Houthi rebels storming cargo ships in the Red Sea, Russia's militarization of the Black Sea, a resurgence of piracy near the Horn of Africa, and China's territorial claims in the South China Sea are disrupting global shipping routes. More than 80% of global goods are transported by ships, and recent events have caused freight rates to soar, impacting industries worldwide. Since the Houthis seized the Galaxy Leader, a Japanese-owned car-carrying cargo ship, in November, freight rates from Shanghai to Genoa have quadrupled. According to Drewry, the average cost of shipping a 40-foot container has jumped 2.7-fold in that time to $3,964. The modern economy's reliance on open seas for trade, established after World War II, is under threat as powerful navies struggle to cooperate, raising concerns about the sustainability of freedom of navigation.

The current maritime security crises, from Europe to East Asia, prompt questions about whether freedom of navigation was a historical anomaly unlikely to endure. The decline in naval power among traditional allies and the rise of assertive nations like China has left a void in securing open seas. The repercussions are far-reaching, affecting global trade, supply chains, and even food prices. As nations grapple with the increasing challenges to maritime security, the very foundation that facilitated the emergence of a global economy is at risk, leading to a reevaluation of how to safeguard the open seas and maintain the benefits of global trade. (Source: Drew Hinshaw and Daniel Michaels)

Dunavant Solution: If you have questions or concerns regarding your maritime shipments, Dunavant's Global Team continually monitors the ongoing challenges with freedom of navigation and can offer alternatives and recommendations. Contact us.

Supply Chain Breaches on the Rise

Supply chain breaches impacting organizations rose by 26% from 2022 to 2023, averaging 4.16 incidents per organization, up from 3.29. BlueVoyant's "The State of Supply Chain Defense Annual Global Insights Reports 2023" reveals persistent challenges, including insufficient awareness of third-party cyber threats. The top concerns include internal understanding gaps, improving third-party supplier security, and meeting regulatory requirements. Monitoring of supply chain vendors increased to 47%, with 44% briefing senior managers monthly on security threats. Notably, 85% increased supply chain/third-party cybersecurity budgets in the past year. The study anticipates ongoing positive trends and technology refinement to mitigate cyber risks in evolving supply chain landscapes. The survey involved 2,100 executives responsible for supply chain and cyber risk, reflecting diverse organizations.

Dunavant Solution: We recognize the critical importance of safeguarding customer data amidst the ever-present cybersecurity challenges. With our skilled IT team, we are continually taking proactive steps to adopt advanced security technologies and practices committed to maintaining the highest standards of data safety for our customers.

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